Bankieri No. 19 - April 2016 by Shoqata Shqiptare Bankave

No. 19, April 2016

Bankieri Publication of Albanian Association of Banks

THE REVOLUTION

MONEY WEEK 2016, IN ALBANIA

AAB MEMBERS

Content Nr. 19, Prill 2016

Bankieri

Bankieri No.19, April 2016 Publication of the Albanian Association of Banks

Botim i Shoqatës Shqiptare të Bankave

Editorial Digitalization: a boom or doom for the banking industry? Elvin MEKA Frontline Digital banking and the Albanian banks Enkelejd ZOTAJ Albanian banking system - even more digital Milena HARITO Digital Banking The wave of the future Anni DASHO

THE REVOLUTION

DIGITAL BANKING

The Revolution

Bankieri is the official publication of the Albanian Association of Banks which mainly focuses on the Albanian banking industry. Bankieri provides 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

Interview Tirana Bank A successful 20-year journey with Albanian customers Dritan MUSTAFA Banking System Student Loans A market segment to be developed Ilda VASO Intensifying the consolidated supervision A real must Teuta BALETA, Rinald GURI Forward contracts: Their use in the Albanian banking industry Niko KOTONIKA Experts' Forum The magic moment of peer-to-peer lending Roberto RUOZI EBTN's Triple E Standard for quality in professional qualifications Alexandra MANIATI Success in retail banking: A jigsaw beyond loyalty Redi MËRTIRI Economist Corner The profile and features of economic growth in Albania, 1992-2015 Adrian CIVICI Social Capital Banks Activities Special The 17 global goals for Sustainable Development the commitment of Albania Bas BERENDS

EDITORIAL TEAM:

Elvin Meka Editor-in-Chief Eftali Peçi Coordinator Junida Tafaj (Katroshi) Collaborator Andis Rado Photographer Design & Layout: FCB Afirma

Printed by:

EDITORIAL BOARD:

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Financial Auditorium Syndicated Lending A simple explanation of complex loans Sonila TAÇI

Financial Education

AAB Activities

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Christian CANACARIS AAB Chairman & CEO of Raiffeisen Bank Albania Gazmend KADRIU AAB Vice Chairman & CEO of Union Bank Periklis DROUGKAS AAB Executive Committee Member & CEO of Alpha Bank Albania Seyhan PENCABLIGIL AAB Executive Committee Member & CEO of Banka Kombëtare Tregtare Frédéric BLANC AAB Executive Committee Member & CEO of Societe Generale Albania Bozhidar TODOROV AAB Executive Committee Member & CEO of FIBank Albania Endrita XHAFERAJ Secretary General, Albanian Association of Banks Hysen ÇELA Chairman of Albanian Institute of Authorized Chartered Auditors (IKEA) Adrian CIVICI President of European University of Tirana Spiro BRUMBULLI Chief of Cabinet, Ministry of Finance Enkeleda SHEHI Chairwoman of Albanian Financial Supervision Authority

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Editorial

Digitalization:

a boom or doom for the banking industry? It is imperative for banks to formulate a winning digital strategy, either individually or collectively, in order to cope successfully with the digital “tsunami”, which will undoubtedly touch and impact every aspect of banking operations and business, ranging from product development, risk management, capital requirements, human resource management, etc. Otherwise and if left unattended, or mismanaged, the digital revolution will turn into an imminent weapon of bank destruction Prof. Asoc. Dr. Elvin MEKA1 Editor-in-Chef “When I go to Silicon Valley…they all want to eat our lunch. Every single one of them is going to try!” Such iconic wording, anxiously articulated by Mr. James Dimon, CEO of JP Morgan Chase at the US investors day some two years ago, summarizes the biggest challenge the entire banking industry, be it commercial or investment one, is currently facing in the course of everyday business. The challenge has a name: DIGITAL REVOLUTION and it is pretty much complex for banks, in the sense that they have to “fight” in two fronts: the digitization and the digitalization. If the former front is intuitively understood, perceived and consequently translated into well-defined operational strategies, many years ago with the proliferation of internet, the latter one is far more arduous, long-lasting and risky, up to the point of business survival. FinTechs with their innovative business models like crowdfunding, P2P, P2P and B2B, along with disruptive technologies are seriously questioning the banking business model, notwithstanding the fact that it has been for banks which have been pioneering the use of computers and information technology. They are

attacking banking industry at almost every vital point of their value chain (loan-making timing, payments, capital requirements, etc.) The attack is hugely asymmetric, as fintechs are not regulated like banks, but allowed to compete by using similar principles, devices and mechanisms, but with totally different approach. However, risk and reward walk side by side, and banks could reap considerable profits, if they adapt swiftly to the actual trend. As McKinsey suggests in a recent research… “that digital laggards could see up to 35 percent of net profit eroded, while winners may realize a profit upside of 40 percent or more”. But to reach that, banks must get familiar with the fact that digitalization at banks and within banking industry is not a choice, or even an option: it is an existential decision, paradoxically made out of banks’ will. Put in other words, digital banking is a do-or-die challenge for banks and digital innovation resisting institutions will be soon technically doomed, as key stakeholders, including investors, clients, markets, etc., will hit back against their “conservatism”. Additionally, banks have to admit that they are conducting business in the era of the Fourth Industrial Revolution (digital revolution) and it will impact the current banking business model, like previous revolutions and innovations used to do

throughout history, by employing the very same mechanism and principle of creative destruction. Although Albania seems to be a tiny place for such revolution, the competition from outside challenging players and practices must not be neglected or sidelined by banks. In this regard, it is imperative for banks in general, and also for Albanian banks, to formulate a winning digital strategy, either individually or collectively, in order to cope successfully with the digital “tsunami”, which will undoubtedly touch and impact every aspect of banking operations and business, ranging from product development, risk management, capital requirements, to human resource management. Otherwise and if left unattended, or mismanaged, the digital revolution will turn into an imminent weapon of bank destruction!

Vice Rector for Academic Process, UET.

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Frontline

Digital banking and the Albanian banks The Albanian market has a unique opportunity, by combining very little legacy of old technologies, together with plain vanilla banking products. This situation allows for projects in Albania, which cost billions in matured markets, to be significantly simpler and less expensive.

by Enkelejd ZOTAJ Head of IT & Communication Division, COO Area

RAIFFEISEN BANK ALBANIA

ill Gates’ famous saying “Banking is necessary; banks are not” represents a trend that pioneers of technology are openly sharing. Such thought is obviously provocative, but is it true? The term “digital” itself, a very popular in the early days of informatics age, was left somehow in the shadows, during following years, in favor of more modern alternatives, like: process automation, electronic channels, omni channel, SOA. Nowadays, the term has reemerged as a key word among professionals, communities and think tanks. Nevertheless, its meaning is not the same; rather, it is broader and deeper. A research form Altimeter Group in 2014: "State of Digital Transformation" from Brian Solis sates that “the vast majority of people Altimeter interviewed for this report claimed they are undergoing Digital Transformation, even though most of them don’t know what it is.”

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As in any case, when a term gains popularity fast and becomes part of the culture and everyday conversations, the possibility of misunderstandings is high. One of the primary sources of misuse comes from sellers and service providers, who like snake oil sellers in medieval times, promise to possess the key of bringing traditional organizations to digital age. Hence, before defining what “digital” means, it is deemed as important to spent a few moments and agree on what it is not. It is not the algebra of Bool, it is not the PC, tablet or any other kind of hardware; it is not a specific technology, not even software; it is not something you may possess, or for that matter which can be purchased. McKinsey defines “digital” as: “…we believe that digital should be seen less as a thing and more a way of doing things. To help make this definition more concrete, we’ve broken it down into three attributes: (i) creating value at the new frontiers of the business world, (ii) creating value in the processes that execute a vision of customer experiences, and (iii) building foundational capabilities that support the entire structure.” Nowdays the digitalization refers

primarily to the transformation of society with regard to our preferences, practices, how we buy, how we consume information, how we make decisions, how we interact with each other, with the state, with the organization, etc. From the organization’s point of view, the digital transformation consists chiefly in the transformation of business model, processes, product lifecycle, and its entire value chain. Technology is a tool the company may harvest for adapting to the new realities and not a purpose per se. In the meanwhile, banks are living a shifting reality, with regards to regulatory framework, new competitors, shrinking margins, cost increase, as well as phenomena that did not exists, just few years ago, like: crowdfunding, p2p lending, the demands of a new generation, increasing demand in quality from customers, the reality of social media, and so on. Most banks do feel the pressure and have been engaging in projects, usually called Digital “Something” in this direction. In another study from McKinsey with 5,400 IT projects shows that, in average for large projects approx. 45 % finish over budget, 7 % with delays, and deliver 56 % less value,

compared to the original scope. This is rather pessimistic. Meanwhile, there are new players in the market, especially the ones that target at global scale, from Silicon Valley, where jeans and hoodies have replaced dark suits and silk ties. Many of these companies want a piece from the banking market, by offering advanced solutions for payments, risk management, micro credit, etc. This trend is captured perfectly by Mr. Jamie Dimon, President and Chief Executive Officer of JPMorgan Chase, the largest American bank, by saying: “When I go to Silicon Valley they all want to eat our lunch. Every single one of them is going to try”. But how much banks need to transform? Depending on how people answer this, they fall somehow between the two extremes. One extreme, with Bill Gates as one of most notorious representative, includes the doomsayers, who predict dark times ahead for banks. This group sees digital transformation as the tide that will erase one and forever most of banks, in favor of companies managed from 24-year olds with hoodies from Silicon Valley. Such group includes sellers of technological solutions, as well. The second group, or the opposite extreme position, includes people that view it as the new pop song, a mechanism IT companies use to push solutions that more often fail than succeed, the next ingenious

Banks are today several steps behind in embracing the opportunities of digital revolution. Some have not even started, whereas some call digital transformation initiatives that address pieces and bits of the whole, or are just implementing some specific technologies. Only few banks are in pole position. It looks like the comfort and inertia of being invincible for decades have left marks.

marketing finding. Most probably, this group is crowded with classical bankers, or executives of different levels. I believe that the reality is somewhere in between. Banks will certainly face hard times, but in the same time they have the experience and resources to adapt and evolve. Banks are today several steps behind in embracing the opportunities of digital revolution. Some have not even started, whereas some call digital transformation initiatives that address pieces and bits of the whole, or are just implementing some specific technologies. Only few banks are in pole position. It looks like the comfort and inertia of being invincible for decades have left marks. I have to admit, the first rounds went to newcomers, the technology companies, the likes of PayPal, Square, Apple Pay, Samsung Pay, Lending Club, which in some regards are eating the banks’ lunch. On the other side, some banks are being very competitive and innovative. Some global examples are: Moven, Fidorbank, Simple, Number26, Metrobankonline, Ally, or Telenor in the region. These banks have departed from the concept of brick-and-mortar banking, thus becoming an integral part of digital reality, their customers are part of. In our region, probably the most interesting event of last years happened in Serbia. The transformation of Telenor mobile operator in a bank was sudden and extremely successful, catapulting it as the second retail bank in the market, in a matter of three years. Like banks, telecommunication companies face fierce competition form the new entrants, like: Viber, Skype, WhatsApp, risking at becoming obsolete. The survival instinct has made them as well to turn their attention into the direction of banks’ lunch, which this time looks even more tempting. What’s about the situation of digital banking in Albania? The global momentum is somehow delayed, as there are not much big initiatives in this area. We see an increase of customers’ demand for quality, mobility and an

increase in price sensitivity. Also, the percentage of people that have access to internet, either from home or form mobile, is increasing rapidly. On the positive side, it looks like the Albanian market has a unique opportunity, by combining very little legacy of old technologies, together with plain vanilla banking products. This situation allows for projects in Albania, which cost billions in matured markets, to be significantly simpler and less expensive. We can harvest the advantage of the late birth, taking advantage of the low complexity, learning from mistakes of the others and possibly skip some phases, in the process of maturity. Of course, this would be possible only if the right motivation exists. In Raiffeisen Bank, the digital transformation is a strategic direction. Most of the new initiatives and budget go in this direction. Some of the largest banks are undertaking important investments in parallel, in the same area. We see some important trends in branch transformation, including technologies that allow for accessing banking service via self-service devices. The radical modernization of electronic channels is still not visible in a large scale. The modernization of supporting processes, I believe, is still a long way to go. In meantime, the initiative of digital signature with identity cards shows clear potential, but further investments in the regulatory framework, an increased awareness and education of judicial system are a must along with imminent opening of digital signature to other competitors, which could result in lower costs. The relatively young age of Albanians, the increasing internet access and the relatively simple banking market could make the ingredients of a fast transformation in this regard. As previously mentioned, the opinion is split on two sides: the one which thinks that banks are in trouble, and they have just started, and the other side that thinks that little will change. It will be very interesting to witness what the coming 5 years will bring aboard. Will banks be part, or a victim of digital revolution?

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Frontline

Albanian banking system - even more digital Generally, even in Albania we notice a growing trend of electronic money flow for phone credit recharges, payments of TV fees, fines, bills, taxes, utilities, etc., which has led to a reduction of cash, by channeling through electronic channels some ALL 200 million, within a couple of years and with a growing number of transactions.

by Milena HARITO

Minister for Innovation and Public Administration, MIPA

he internet and digital technologies are transforming our everyday lives with a pace and proportions of a real revolution. These fast and deep transformations are widely regarded nowdays as the second most important revolution, after the industrial one. The digital revolution, which kick started with the transformation of all human knowledge into a digital form and carried on with an universal and remote access to this knowledge, has created for the first time in the history of mankind a new situation: practically every person now who has internet access in mobile phone, i.e. in his hand, has got an access, at a negligible cost, to almost all knowledge generated by mankind, and s/he can interact with anyone, instantly. This is an unprecedented situation that also marks a social revolution. Albania, like Europe and the world, is embracing this revolution, by opening

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new opportunities for everyone. In this context, the Albanian government is strongly committed to support and promote digital initiatives, as a powerful tool for modernizing governance, increasing knowledge and openness of our society, spurring economic development and enriching citizens. Albania has made significant progress in the field of information society and media. Our legal framework is almost entirely according to the best EU models. Laws are indispensable to modernize the functioning of the state and public administration through digitization and internet, but Albania has also the basic modernizing infrastructure: a complete coverage of population with mobile phones, a digital civil register and

the application of electronic signature for different services that banks offer to their customers, ensure savings, in terms of printing and archiving costs, as well as providing a fast and quality service for clients.

electronic identification cards, as well as a digital interactive infrastructure of all government systems, which enables the online delivery of public services, through a unique portal, called e-Albania. Our population is young and uses cell phones massively. The country has built a developed infrastructure for 3G mobile internet and has recently started 4G internet services, too. Albanian citizens are fully equipped with electronic identity cards that allow electronic identification and the qualified electronic signature. Our governmental systems are interconnected through a modern infrastructure, initially created with EU support and empowered during the last two years with investments from the Albanian government. The Government Data Center, established according to modern international standards, serves to all central institutions, but also for municipalities, on special occasions. The portal e-Albania for public services offers a number of public services, where the most recent one is obtaining health card, online. The actual trend is to invest in digital education, both in equipment and in curricula, given the

importance it has gained throughout the world, where most complete example is the digital education program, announced by President Obama, in early 2016. We have also encouraged new entrepreneurships towards innovation through incentive programs and incubators, and such approach will be soon reinforced with a special program at the Building of Innovation. Information and communication technology, ICT, is the future of economic development. Our mission is to move quickly towards digital economy. The Strategy "Digital Agenda 2015 - 2020", defines the governmentâ&#x20AC;&#x2122;s vision and will in this sector, on our road towards EU membership, aiming at become part of the so-called "Digital Single Market". In terms of digital infrastructure, the banking sector is among the most developed sectors in Albania, due to the presence of international banks, which bring here the best practices. As the Minister for Public Administration and Innovation, I have been always putting in the spotlight the use of new ICT services in the banking system, with the aim to facilitate services to citizens within a short time, but also to help formalizing the economy, by reducing cash usage. This initiative was started since the very first days of current government, by enabling the payment of utility bills, especially energy bills for individuals through mobile devices, within the first 300 days of the government, and this so not only because it is a global trend, but also because Albanian citizens use them widely. Their use exceeds 100%, while internet access via mobile exceeds 61%, which means that 60% of the population has a device that can be used any time to receive services, especially make payments through it. Promoting the cooperation between banking operators, financial institutions and service providers has brought the need to improve the systems and filling some gaps in the legal framework, in order to create appropriate ground for using new payment instruments for citizens,

but also for service providers and the banking system, to reduce operational costs and reduce the use of cash. The participation of MIPA at National Payment Committee (NPC) indicates the importance given to the use of digital tools, but also an appreciation for the substantial contribution in coordinating the actions among stakeholders, in the frame of using payment instruments in general, and in government services, in particular. The government has set as a priority the improvement of public services, including facilitating the automation of payments, as one of the mechanisms to combat corruption. In this context, e-Albania portal offers, since one year from now, the opportunity to execute payments. It is worthy to mention also the initiatives taken by the government and MIPA with regard to extending these services toward that part of the population that has no access to banking services, by way of cooperating with some nonbank financial institutions. Today, the presence of innovative companies, like: MPAY, EasyPay or recently M-PESA from Vodafone shows that people are interested in making payments via mobile phones, as it was expected. Generally, even in Albania we notice a growing trend of electronic money flow for phone credit recharges, payments of TV fees, fines, bills, taxes, utilities, etc., which has led to a reduction of cash, by channeling through electronic channels some ALL 200 million, within a couple of years and with a growing number of transactions.

The Albanian government is strongly committed to support and promote digital initiatives, as a powerful tool for modernizing governance, increasing knowledge and openness of our society, spurring economic development and enriching citizens.

However, the increasing number of services requires further adjustments, overcoming the old methods of work, beating the mentality of using booklets, the counter use, but always establishing strict security and procedural rules in order to facilitate citizens' life, reduce the service cost, as well as ensuring full security in digital systems. Some banks in Albania are working to integrate the services of authentication and electronic signature into banking services, where Raiffeisen Bank and Societe Generale have commenced a pilot program in this regard. Raiffeisen Bank is piloting, from January 2016, the authentication service at one of its main branches in Tirana, aiming to identify its customers that carry out external bank transfers, by reading the ID card with biometric reader. Societe Generale â&#x20AC;&#x201C; Albania is working to integrate the electronic signature service with its services mainly for opening new deposits, where the identification and contract signing for opening the deposit is made electronically. Also, some efforts are made to integrate the authentication service with bank's services. Microfinance institutions are working to integrate the authentication and electronic signature service through the identity card and fingerprint, chiefly for signing the Consent Form, through which the client concedes institution the right to control the Central Credit Register at Bank of Albania, but also for quick signing of loans, mainly consumer ones. Bank client identification through the identity card and fingerprint is do helpful in eliminating fraud and tax evasion cases, etc., proving that the person who receives the service is the relevant person. Also, the application of electronic signature for different services that banks offer to their customers, ensure savings, in terms of printing and archiving costs, as well as providing a fast and quality service for clients. The use of electronic services through secure electronic identification and electronic signature, are powerful tools to eliminate fraud cases in the banking sector.

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Frontline

Digital Banking

The wave of the future The migration to a digital banking world will not be smooth and will lead to further fragmentation in financial service markets. Banks must undergo a deeper modification of their business, culture, and IT, and above all, will need to put innovation at its core and use data to create new business, revenue and customer engagement

by Prof. Assoc. Dr. Anni DASHO Executive Director, UET- IT Solutions, EUROPEAN UNIVERSITY OF TIRANA

ew developed and implemented technologies change the way people behave and interact in their everyday life. They are changing the business world strategic context, by altering customers’ behavior and expectations, business conduct and structure of competition, so the banking industry is no exception at all. Most people in the banking sector agree that digital banking is the wave of the future. The views of what ‘digital’ means for banking are diverse, and most of the experts/consultants discuss and argue that digitalization will reshape financial institutions fundamentally and will require a structur-

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al change in banking system. “Digital banking” often gets confused with mobile banking and online banking, because all these involve digital applications, in one form or another. Digital Banking is an urgency, not an academic question, and nowadays digital change goes beyond banking. Digital banking is the incorporation of new and developing technologies throughout a financial services entity, in concert with associated changes in internal and external corporate and personnel relationships, to provide enhanced customer services and experiences effectively and efficiently. There are two aspects to the digital business evolution: • Digitization, which is an optimization opportunity and it uses digital means to make more efficient and effective and optimize existing resources and processes, and this approach can bring cost-reduction and increase agility,

• Digitalization, is a business opportunity and it uses digital assets and capabilities to create new services that are valuable to the customers, which can bring differentiation, business innovation, and new revenues. Digitalization creates new value based on digital assets and capabilities. Most banks are working on the first aspect, but have the opportunity to further develop the second one as well. Indeed, digitalization goes beyond simply substituting analog or physical resources with their digital counterparts. Digitalization captures the notion of digital evolution to change business models and the relationship between customer value and company revenue. But why are banks increasingly and incessantly turning digital? There are numerous reasons which could give some explanations for this behavior, but probably the most important and influencing elements, causing a deep

impact on the digital transformation of financial services are the following trends: 1. The development of new technologies The swift development of new technologies, Internet, smartphones and tablets, in less than 10 years, along with the challenge of new entrants (operating digital-only products and services) and new models, adds a new dimension to the changing role of banking. Technology companies and startups rapidly expand their activities to financial services, continually innovating and competing – or collaborating – with banks and other financial institutions in various segments of the financial markets or in activities that do not specifically require a banking licence. This contributes to pushing banks to rethink the way they operate. 2. The change of customer expectations The change is also coming from new customer expectations. Today’s customers are not the same as they were ten years ago. Their expectations towards products and services have changed in just a few years. Digital consumers belong to the digital native generation, born and raised with Internet: the generation born between 1977 and 1994 considered remarkable technology wise, exposed to technology since early childhood and impervious to most traditional marketing; and the generation born in the mid-90s to early ‘00s, accustomed to a media and online environment in which options are virtually limitless. Both generations are extremely connected and rely heavily on smartphones/apps and even wearables to enjoy the best customer-experience or benefit from the most popular content. They adapt quickly to new changes and continually seek information or advice on the Internet or social networks. These digital consumers demand more choices, immediate availability and direct access to ready-to-use infor-

mation and services. They expect fast, safe and simple banking products and services. They want banks to provide more than mere transactional services and expect them to understand their needs and to act as trusted advisers. The digital challenge for banks The migration to a digital banking world will not be smooth and will lead to further fragmentation in financial service markets. To achieve the agility and openness necessary to thrive in the digital world, banks will be required to equip a set of modern solutions, including multichannel customer experience platforms, advanced analytics for CRM and marketing, and open platforms for appstores and APIs. Beyond these, banks must undergo a deeper modification of their business, culture,

Albanian banks and digitalization Banks in Albania have struggled to purvey their complex offerings in digital channels where ultra-simplicity is needed to engage impatient online shoppers. Albanian Consumers have hugely benefited from the convenience of web and mobile banking, but have tended to view these services as free add-ons to the checking account. Nearly one-third of Albanian consumers now prefer to search online for banking products and providers, even though most of them still go to the bank branches to complete their transactions. A redoubled effort is needed to attract and engage online customers, with overall sales growth increasingly affected by the success of this effort.

and IT. In particular, a digital bank will put innovation at its core and use data to create new business, revenue and customer engagement. However, it must be clear that “digital” is a journey, and not a destination, so banks, even Albanian ones, must continuously and relentlessly evolve at higher velocities to meet the challenges of the digital age. Depending on their context, ecosystem and strategy, each bank will be required to assemble a different set of offers and services to engage their customers and create new value and revenues. Everyone within banking industry knows that the digital business evolution is not limited to retail banking, thus other bank business lines (private and commercial banking) would benefit from similar tools, principles, and strategies, to drive customer engagement in the digital age. As per above, banks will need to cope successfully with the digitalization, as the wave of the future, by crafting and implementing the following four identified digital strategies, which will allow banking sector to gain market share and control costs: 1. Launch a digital brand that’s separate from a bank’s existing brand. This allows the bank to separate its digital offerings from the rest of its services and provide an entirely different experience and pricing structure to its online customers. 2. Eliminate paper and create a set of digital processes in order to compete in a digital world. 3. Modernize the digital experience so it more closely resembles all the other digital experiences the bank’s customers are having. 4. Add new digital capabilities that go beyond Internet banking and mobile banking to deliver new types of digital assets. Possibilities include standalone person-to-person and digital payment services that target a particular geography or market, and digital wallets linked to the holder’s bank account.

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Interview

Tirana Bank

A successful 20-year journey with Albanian customers Tirana Bank is here for 20 years in a row and its contribution to the Albanian society has been and will be very important, not only in terms of purely banking business, but also in terms of corporate social responsibility. Tirana Bank is particularly focused on the continuous support for people in need and for valuable projects with positive impact on society

Dritan MUSTAFA Chief Executive Officer TIRANA BANK

he Albanian banking system is reconfirming its stability during recent years, by way of consolidated indicators regarding liquidity and capital adequacy indicators. The economic and financial developments in the region, mainly within Greek economy, addressed some specific risks of a temporary nature, which were efficiently managed by all stakeholders in the country and were successfully overcome. Despite the fact that the main macroeconomic indicators are deemed as positive, the Albanian economy is characterized by a feeble consumer demand and steady trend of savings, as well as by a relatively low level of public and private investments. These

indicators are decisive, in terms of moderate rate in the banking system development, which demonstrates stability in terms of deposit portfolio, but continues to face significant challenges, in terms of improving loan portfolio quality and an obvious approach to resume the lending process. Tirana Bank continues to maintain its position in the banking market, through sound liquidity and capital indicators, in compliance with the strategic objective to optimize its presence in the market. Our goal is to maintain the position of Tirana Bank within Albanian market and to strengthen further a clear identity, based on solid financial foundations. Running Tirana Bank means being part of Piraeus Bank Group, which is currently the largest banking group in Greece, with a 100-year experience, as founded in 1916 and with 22.000 employees, at its offices in 10 countries around the world. Group expertise and

its consolidated corporation profile is an important support for Tirana Bank activity in Albania. Our estimations for this year will be characterized by a cautious behaviour of banks towards lending activities, persistent efforts to keep non-performing loans portfolio under control, as well as by further reduction of interest rates. Tirana Bank, as one of main banks in the Albanian banking market, has put the recovery of business and lending activity as its main objective, by acting simultaneously and intensively to reduce the non-performing loans portfolio. We intend to maintain our position in the market at the current level of our presence, in terms of branch network, by keeping up the high quality standard of customer service. Winbank â&#x20AC;&#x201C; Tirana Bankâ&#x20AC;&#x2122;s digital banking We are fully committed to developing the business, creating the most appropriate products and further

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improving the quality and service infrastructure for the customer. Our approach is oriented towards improving the information technology and to offer facilities, in accordance with the need to modernize products and services, toward the standards of banking industry in the region and beyond it. In frame of the high quality standard of services, winbank - Internet banking is currently one of the most important platforms, of which we are proud of. Winbank is our integrated platform for banking services in Internet, which offers alternative channels of banking transfers, such as: web Banking, Mobile Banking, Phone banking, winbank for credit cards and winbank “Alert Signals”, for users of credit cards. Digital Banking is one of our strongest points and the banking of the future, because the use of electronic platform enables customers to carry out full banking transactions, 24 hours a day, 7 days a week, thus facilitating

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the banking transactions the customer needs. Tirana Bank was awarded as “Best Consumer Internet Bank” in Albania for 2014, by Global Finance, in recognition of the group’s success story in digital banking. This award shows the great importance that we put on the technology and alternative electronic channels and we will continue to be in line with the latest developments in the area of technology, in order to provide our customers with the best possible services. Tirana Bank operates for 20 years in Albania and in this jubilee year, digital banking is one of our main strengths! Tirana Bank – 20 years in Albania I have the personal satisfaction to be the head of Tirana Bank in this jubilee year, during of which Tirana Bank has its 20th anniversary of its opening, since September 1996. In these 20 years, Tirana Bank and its customers grew up together. As the first private bank in Albania, the first businesses

and customers were in their first steps and Tirana Bank was adapted to the market and developed its business according to their needs. Tirana Bank deems employees and the administration model, vision, focus on superior customer service, as well as appropriate financial solutions, as the elements of particular importance. Our focus to stay by them and help them achieving the objectives is quintessential to us. Tirana Bank is here for 20 years in a row and its contribution to the Albanian society has been and will be very important, not only in terms of purely banking business, but also in terms of corporate social responsibility. Tirana Bank is particularly focused on the continuous support for people in need and for valuable projects with positive impact on society. We grow together with our customers and along with all economic and social factors of our country, striving to influence positively on these factors.

Banking System

Student Loans

A market segment to be developed Over the years, student loans will naturally hit the market, as driven by students, and such a demand will be dictated by investments in human resources and infrastructure made by university structures, and also by improved economic factors

by Ilda VASO

Head of Product Development Unit Marketing Department, CREDINS BANK

tudent loan is not nothing but a financial aid, which must be repaid over time. Such product plays a takes a certain weight, depending on the country in concern, where the culture, education acts, economic growth and development, as well as a whole chain of social values are considered as important factors in this regard. In our culture, higher education is still perceived as a right, for which the state should bear the main financial burden. Actually, such perception is still ubiquitous in almost all Europe, where studies are financed, in a major part, by the state and student loan is less common. The situation is quite different in the United Kingdom, or United States, where about 60% of students who finance their higher

studies by getting a loan. It is for these countries, that student loan is almost a necessity and plays an important role in the studentsâ&#x20AC;&#x2122; progress and respective career in the future, where the product is shaped in the proper form and structure, thus adapting not only to the studentâ&#x20AC;&#x2122;s needs but also to the prospect of a healthy career, which will lead to final repayment of liability. A basic student loan, upon a reasonable perception of the product, commences the payback period after graduation. For example, in the United States, student loans are mainly disbursed by the state, upon complying with certain criteria, and are usually accompanied by a several-month grace period, following graduation. Loans, disbursed by financial institutions, are pretty much more costly, because unlike federal loans, the interests are calculated since the beginning of studies, although repayment time follows them. In this case, students pay interest on interest. However, the experience of such countries has shown that this investment has produced an excellent return for the state, private sector and the individual, him/herself.

As mentioned above, the development of this product is chiefly related to the financing of higher education system. The universities in these countries are mainly organized as NGOs and their source of funding are student tuition fees, in agreement with various donors and, and to a lesser extent, the state. The universities, themselves, ensure a set of student internship contracts with companies active in the industry, by providing a guarantee that they will be employed in such enterprises, at the end of the studies. It is deemed that these factors have been instrumental in forming the baseline for the success story of such product. In our country, the effort to draft student loan as a genuine product has remained at tentative levels. This is so, not for the lack of will by banks and financial institutions, but because of a bunch of factors, which have actually formed a barrier, in this regard. Student loan has been mainly shaped in the form and around the features of a consumer loan, with immediate repayment, by a normal amortization plan, thus throwing the repayment

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burden exclusively on studentâ&#x20AC;&#x2122;s parents. Owners of private universities have made strident efforts to find forms of cooperation with banks, where the university assumes the repayment of interest, but the experience so far has shown that this incentive has not been enough to boost demand for student loans. Also, legal opportunities to allow any 3 - 4-year grace periods are simply absent. The new law on higher education and the relationship of education system with the industry are two key factors that could facilitate the functioning of this product in Albania. Student loan is also closely related with the economyâ&#x20AC;&#x2122;s capacity to ensure employment. All these are

fundamental components of analysis that help developers and providers of such products and segments, to craft and create products the market needs and which are helpful for business development. Lack of employment, the intended use of the loan and the value perceived by society, are clearly the biggest obstacles in this regard. The value chain, as per above mentioned, is an intensively-used concept in business activity. Higher education is a public good and the way it is perceived by the society is very important. In the above cited models, the value chain creation has passed through private financing, in the best interest of society, by removing the burden of expenses from the state. This is the main goal of higher

education reform in Albania, which is based mainly on the US and AngloSaxon model: "building the value chain through private funding, in the best interest of the society." In this regard, I think that the reform undertaken by the Albanian government will, in many ways, have a significant long-term impact, but above all on providing relevant incentives for university structures to be self-improving, thus reflecting such impact on students, themselves. Over the years, student loans will naturally hit the market, as driven by students, and such a demand will be dictated by investments in human resources and infrastructure made by university structures, and also by improved economic factors.

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Banking System

Intensifying the consolidated supervision A real must Such a discussion is necessary to commence even in case of combined supervisory architecture in the Albanian market, were several combined structures of financial groups have been created, and they are evolving and expanding by Teuta BALETA and Rinald GURI Experts for financial regulation

n the global financial environment, where competition grows and users of financial products have increasingly sophisticated demands, the degree of products ‘complexity is going north. The efforts of financial institutions to increase efficiency, revenue and risk diversification, as well as to gain weight in the markets, have given life to creation of financial conglomerates. Such "creatures" are groups of institutions, licensed to conduct banking, insurance or capital market activities, which are exposed, altogether, against additional risk which are known as "group risk". Such groups are real challenges to regulation and supervision process, because of the opportunities for regulatory arbitrage, caused by various supervision standards, or lack of consistency in the legislation which regulate different financial sectors. Also, such groups create premises for conflicts of interest, management complexity, spillover effects, enhanced systemic risks and most importantly, a multiple use of the capital unit. In this regard, the supervision on the basis of a certain institution/financial activity is not enough to encompass the full spectrum of risks. The standards of consolidated supervision are developed to correct the supervision & oversight process, where

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the most typical is the EU Directive on Financial Conglomerates. A joint forum of the International Association of Insurance Supervisors (IAIS), the International Organization of Securities Commissions (IOSCO) and the Basel Committee on Banking Supervision is currently operating, on an international scale, to ensure a consolidated supervision. In the case of exercising the consolidated supervision, it is essential for the relevant regulatory authority to achieve: • Knowledge about group’s general structure and all important components of the group, domestic or foreign ones, as well as supervising and regulating all activities; • Having a supervisory framework that assesses risks of non-banking activities and their relative impact on the bank; • Having agreements with other regulators / supervisors to get information on financial status and risks. However, in these cases the focus remains on the bank or banking group, which is in the center of the financial conglomerate, and not on the supervision of other units. Other units are considered, proportionately to the extent of their impact on banks’ reputation and financial health. In short, supervisors focus on evidencing and closing channels of

problems’ spillover. This is the spirit even in drafting the consolidated supervision provisions in the Albanian legislation (banking and insurance, respectively). Meanwhile, it is worth highlighting the fact that insurance legislation has made further steps, by defining and extending the spectrum of financial supervision up to financial conglomerates, thus being so aligned with the best standards in the field and EU directives. Another aspect of supervision, which includes more than one type of financial institution, is the so-called "combined supervision", which deals with risks

Another aspect of supervision, which includes more than one type of financial institution, is the so-called "combined supervision", which deals with risks created for a set of combined group of financial institutions, without focusing exclusively on one bank/ insurance company or group of banking/insurance companies, but instead on shifting the problem from one institution to another, or throughout the group.

created for a set of combined group of financial institutions, without focusing exclusively on one bank/insurance company or group of banking/insurance companies, but instead on shifting the problem from one institution to another, or throughout the group. Such structures can be transformed or not into systemic risks, but they, themselves, elevate the complexity degree of supervision and regulation. The situation gets more complicated when combined groups of financial institutions are supervised by different authorities. This increases the risk of partial supervision and failure to identify, in due time, problems developing within the group, and therefore, taking delayed corrective measures. In a systemic framework, such groupsâ&#x20AC;&#x2122; risks are intended to be managed by financial stability councils, which have clearly defined tasks for oversight/ supervision macro policy, or coordinating the functions of various regulatory authorities. For example, in Croatia, as country of the region and EU member, the functioning of financial stability council is regulated by a special law. At group level, another widespread form of carrying out the consolidated supervision is reaching agreements with other regulatory authorities to exch-ange information and carry out joint inspections. However, the effectiveness of such a mechanism depends chiefly on how systematic, the implementation of these agreements, is in practice. This element has a particular importance, to the point that even the Government Audit Office (GAO) in US audits the cooperation performance between financial regulatory authorities. Moreover, the interest of special regulatory authorities to address risks with transparency and comprehensiveness, or their ability to identify the significance of certain developments in the markets or institutions, which fall out of their focus, on institutions they supervise, may not be the same. Consequently, the trend and preference, in many countries, has been to consolidate the supervisory functions under a sole authority, to ensure clearly defined supervisory responsibilities. Such a discussion is necessary to commence even in case of combined supervisory architecture in the Albanian

market, were several combined structures of financial groups have been created, and they are evolving and expanding. The following scheme is just an illustration. It does not identify institutions by names, not for the sake of confidentiality (data on names of institutions, their properties and assets are publicly available), but for the purpose of focusing on the complexity, such combined financial groups, are displaying in Albania. The scheme depicts financial institutions, which are part of international groups, with combined total assets of significant weight to GDP, which causes complex structure of ownership and management, and significant exposure toward developments of an economy. A similar group combination is evidenced even in the case of financial

institutions, owned by domestic capital. It is crystal clear that, such group combinations of institutions need a more structured supervisory and regulatory process, at least in three respects: (i) joint risk analysis, arising from the inclusion of existing financial institutions into new financial activities; (ii) coordination of regulation process, to prevent unregulated areas; (iii) exchange of financial information and joint inspection of group activity. In particular, it is deemed as important having a systematic discussion, to identify financial groups. This discussion, undoubtedly, cannot exclude the more efficient configuration of supervisory authorities, to ensure the same supervision standard and excluding loopholes to escape the supervisory focus.

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Banking System

Forward contracts:

Their use in the Albanian banking industry The existence and improvement of a financial market, which would create opportunities for all market participants to execute financial transactions that make it possible to remove the uncertainty especially in times of high volatility, would be a step forward for further development of the overall financial market.

by Niko KOTONIKA, CFA Head of Treasury NBG BANK ALBANIA

trong movements of exchange rates, as a consequence of the increased volatility in international markets, and where USD/ALL exchange rate, impacted by movements in international markets, has been appreciated by approximately 25% during last year only, showed how important is to hedge the foreign exchange exposure. In this way, it is necessary to develop the local market with financial derivative products, which provide all market participants with the possibility to execute the desired hedging. Given that the banking system acts as a market maker for the majority of financial products and services, the role of banks in creating and developing the FX derivative markets is very important. The most simple derivative product than can be used in this case is the forward contract. Forward contracts are contracts signed between two parties which agree to execute a financial transaction on a future date, with a predefined price. Forward contracts should not be confused with options and futures. Options offer to the

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buyer the right, but not the obligation, to execute the transaction whereas futures are largely standardized contracts, their trading takes place mainly in organized exchanges, and they can be bought or sold, separately. Forward contracts are customized to the needs of the buyer and seller and are traded

In order to facilitate the interbank market, the AAB Treasury Committee has prepared a Draft Master Agreement, following international best practices, which would facilitate not only the development of FX forward market between banks, but could also be used for other types of financial derivatives, such as foreign exchange swaps, etc.

mainly over-the-counter. These contracts can be modeled for all kinds of financial transactions, including foreign exchange, interest rates, etc. The most common contracts that are currently being traded in the Albanian financial market are foreign exchange forwards. Despite that, there is a market for these contracts, but it is still

weak and illiquid. The actual demand for these products has been generally low. One of the main reasons of weak demand is that interest rate differentials, included in the price calculation formula between local (ALL) and foreign currency (EUR or USD), have been significantly wide. For this reason, the forward price would be much higher from the spot price, thus losing attractiveness and interest of the investors to execute such a transaction. The recent narrowing of such interest rate differentials, as a consequence of the decline in Treasury Bills yields should have increased the attractiveness for these products. Despite this, the lack of financial education, especially related to products that could be used to hedge financial risks, remains a significant obstacle in this regard. Comparatively, in international markets these contracts occupy a very important part in the total trading volume of foreign exchange products. According to a study performed by BIS Basel on foreign currency markets, FX forwards share 13% of the international market. FX Swaps that are used generally for liquidity management come in the first place with 42% of the market, spot transactions in the second place with 38% of the total market and forward transactions come in third. The same study shows that the total size of the FX forward market in 2013 was increased into USD 680

Billion, up from USD 475 billion, that was the size of this market in 2010. This shows that foreign exchange forward products in international markets are not only popular, but have showed a clear trend of growth. Taking into consideration that we are mainly an importing country, forward contracts would act as a very good protection for importers, which have scheduled their payments in foreign currency on a future date. A forward contract would be beneficial also to local companies that are exposed with foreign currency loans, and also exporters waiting to receive a payment in foreign currency in the future. Although theoretically possible to structure a foreign exchange forward contract for individual clients, practically it is almost impossible for this type of contract to be closed for small amounts. The reason behind is that of high costs of hedging that the bank has to perform at the moment it enters into such transaction. In this regard, FX forwards can be used by companies or individuals that

The most common contracts that are currently being traded in the Albanian financial market are foreign exchange forwards. Despite that, there is a market for these contracts, but it is still weak and illiquid.

spot exchange rate, as well as the interest rates that should match the maturity of the forward contract. In order to have a perfect hedge when entering a forward contract, these interest rates should represent, to the closest extent, the reality of borrowing or lending funds in the interbank market. The actual trading in the money market is focused mainly in short term activity (up to one week), which makes it difficult to set a fully hedged price for a forward contract. Further development of the collateralized market, through Repo agreements extending beyond one week, and also the creation of an interbank FX swap market, which are also derivative products used for liquidity management, as the two necessary elements in the improvement of the abovementioned infrastructure. In order to facilitate the interbank market, the AAB Treasury Committee has prepared a Draft Master Agreement, following international best practices, which would facilitate not only the development of FX forward market between banks, but could also be used for other types of financial derivatives, such as foreign exchange swaps, etc. 2. Promotion of these products, as well as education of exposed clients in relation to the importance of being hedged against different risks, such as the foreign exchange risk, would also be another very

important element that would foster the demand for such products. This would be beneficial to all parties involved; banks would ensure an additional opportunity to increase business and profitability, whereas clients would obtain an additional opportunity of being hedged from unexpected moves of foreign exchange rates. The increase of trading volumes would reduce margins, by increasing attractiveness for such products for all market participants. It should be noted, however, that being hedged through a forward contract, would mean a foreign exchange neutralization effect for clients, who would give up any potential profits, which would be realized in case of any favorable foreign exchange movement for them. The decision to be hedged or not is a decision that requires a thorough judgment, which involves not only the risk analysis, including the ability and the desire of risk taking, but also the desire for profitability from foreign exchange movements of the exposed stakeholders. However, the existence and improvement of a financial market, which would create opportunities for all market participants to execute financial transactions that make it possible to remove the uncertainty especially in times of high volatility, would be a step forward for further development of the overall financial market.

have a big cash flow payment activity in the future, only, and who need protection from foreign exchange volatility. Banks have the risk that, in case a forward contract is not executed at the maturity date, they could face losses, as a consequence of the difference of the forward price agreed with the spot exchange rate at the settlement date. However, such risk can be avoided by requesting a guarantee, which acts as a collateral that protects the bank, in case of non-execution. In order for this market to be developed in Albania, there should be improvements in the market infrastructure, related to supply factors, as well as by promoting further the demand for these products as per following: 1. Further development of the money market, is a necessary condition. That is so, because when pricing a forward contract, financial institutions, which act as market makers, take into consideration the 1

Triennial Central Bank Survey, Foreign Exchange turnover in April 2013, September 2013, Bank For International Settlements.

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Experts' Forum

The magic moment of peer-to-peer lending It is essential to find and strengthen new sources and new types of lending. In this sense, the P2P and P2B lending may represent one of the solutions and it is therefore necessary that both banking and financial authorities and market participants (investors and credit applicants) use them better, and to a greater extent

by Roberto RUOZI Professor Emeritus UNIVERSITÀ BOCCONI DI MILANO

rowdfunding is evolving in the world, in four basic forms: donations, rewards, equity or investment and lending. The latter seems destined to be the most successful, as per the most recent data, which show that in the region including the United States, China and Europe, it increased from USD 5 billion in 2012 to USD 111 billion, in June 2015. Only in the United Kingdom, the country with the world’s highest ratio between social loans and number of inhabitants, such loans increased from GBP 189 million in 2012 to GBP 1,296 million, in 2014. The related activity is defined by the European Banking Authority (EBA) as: “Open calls to the wider public by fund seekers through a third party, typically an on-line platform, to raise funds for a project or for personal purposes, in the form of a loan agreement, with a promise to repay with (or in certain cases without) interest. The fund raisers may include individuals, start-up companies or existing SMEs, that are seeking an alternative means of funding, rather the traditional credit market”.

Essentially, in most cases, a specific fundraising platform collects funds in the market, which are deposited to a custodian bank, where they remain separated both from the assets of the platform and from those of other lenders or borrowers. The platform managers facilitate the meeting of demand and supply of funds, evaluate the creditworthiness of the credit applicants and ensure the collection of debts when due. For this service they receive commissions. The conditions, under which the loans are granted, differ according to the relative

In any case, the P2P lending crowdfunding seems destined to develop further, especially in countries whose economic and social development requires sources of finance increasingly more efficient, effective, abundant and diversified, in order to balance the behavior of classic intermediaries, oriented to the reduction of financial support to the economy.

risk, calculated using on special scoring programs. The remunerations of investors, who are in direct relationship with the debtors, are generally very interesting and superior to those of many other traditional forms of savings investment. As an example, I recall that interest rate on such investments in Italy oscillates today between 4 and 7% when the banks’ savings are remunerated at rates close to zero. There are different main reasons for the success of the P2P (Peer-to-Peer) lending crowdfunding. The first one concerns some changes in society, such as the desire to communicate and to act, even in the financial domain, more directly with the counterparty, without the intervention of intermediaries. This desire sharpened due to the progressive loss of confidence that the public, especially the younger one, has shown regarding some classic types of financial intermediaries. The same desire is also the origin of the resounding success of social networks, but also of the online selling and buying of products and services, and above all, of some financial activities, such as virtual currencies (like Bitcoin). The second reason concerns the exceptional development of equipments of information and communication technology, particularly personal computers, mobile phones and smartphones, and also to the expansion of the so-called sharing economy,

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where do the P2P belong. The expansion of the latter has also been facilitated by the behaviour of banks that have reduced the propensity for granting loans, as well as by the direct intervention of the banks themselves, which have found in the financing of platforms a new asset class, that allows them to diversify investments without major organizational efforts. The volume of funds invested in the platforms by banks and institutional investors has in fact boomed in the last two years. So far the P2P (also called Personto-Person) lending has regarded almost exclusively the lending to households, but it is increasingly of interest also to SMEs, giving rise to the P2B (Person-to-Business) which becomes B2B when the funder and the funded are enterprises (banking or nonbanking). The only difficulty of the real

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development of P2B, whose size though has already exceeded that of classic P2P in the United Kingdom, consists in the difficulty of obtaining reliable, accurate and timely data on the economic, financial and equity situation of SMEs. This hinders the use of automated techniques for the assessment of their creditworthiness based on scoring and, consequently, the determination of the required rating for the definition of the contractual conditions of the loans. The financing of the platforms is however not suitable for all the savers/investors, since it has a medium/high risk, which should be managed with a solid financial culture. The international experience shows, however, that the assessments of creditworthiness made by the platforms are having very good results. For example, I would note that, in fact, the default rate on loans granted by the

platforms in Italy is less than 3%, while that of personal loans at a national level is more than 7%. In any case, the P2P lending crowdfunding seems destined to develop further, especially in countries whose economic and social development requires sources of finance increasingly more efficient, effective, abundant and diversified, in order to balance the behavior of classic intermediaries, oriented to the reduction of financial support to the economy. Therefore, it is essential to find and strengthen new sources and new types of lending. In this sense, the P2P and P2B lending may represent one of the solutions and it is therefore necessary that both banking and financial authorities and market participants (investors and credit applicants) use them better, and to a greater extent.

Experts' Forum

EBTN's Triple E Standard for quality in professional qualifications The vision of EBTN is to become the standard-setting organization for the accreditation of qualifications in the sector and, to this end, it created in 2015 the Triple E Standard as a proposal aspiring to contribute to the comparability of qualifications and the mobility of their holders across Europe

by Alexandra MANIATI Director of Hellenic Banking Institute, Hellenic Bank Association Secretary of Executive Committee & Member of Board of Directors of EBTN

he financial services sector as a rapidly evolving, knowledgeintensive industry characterized by continuous developments, mainly in regulation and technology, invests heavily in continuous personnel training. On the other hand, outsourced non-formal1 education is offered by numerous providers, local and foreign, using various methods that range from traditional in-class training to innovative technology-enabled learning, leading to all kinds of qualifications2. Human Resources & Training professionals dealing with recruitment, design of career paths and proposal of training solutions

for compliance and business objectives, and sector employees seeking to build their personal qualifications portfolio come across a large variety of qualifications and providers. The task of making the right decision by de-coding what each qualification actually represents, in terms of knowledge, skills and competences of the holder, as well as the status of the issuer, and comparing it to others can be extremely challenging. Since 2002, when the Copenhagen Process was launched in the EU, aiming to improve the performance, quality and attractiveness of vocational education and training in Europe, a huge effort has been under way to build a common European "language" in professional education. EBTN's Triple E Standard aspires to contribute to this effort, so that when one comes across a Triple E accredited certificate they can easily understand the value it represents. The European Banking & Financial Services Training Association (EBTN) is the united voice of providers of education and training, in the banking and finance

sector. Through its 24 members and 16 associates â&#x20AC;&#x201C; the Albanian Association of Banks included - it represents the interests of leading banking institutes from Europe and beyond. The vision of EBTN is to become the standard-setting organization for the accreditation of qualifications in the sector and, to this end, it created in 2015 the Triple E Standard as a proposal aspiring to contribute to the comparability of qualifications and the mobility of their holders across Europe. The Triple E Standard is the outcome of a twoyear project, co-funded by the European Commission. It is a quality standard for qualifications in the banking sector, developed through a broad consultative process with over 350 stakeholders from the European financial industry. EBTN was the leader of the Consortium and the Hellenic Banking Institute (HBI) of the Hellenic Bank Association was one of the eight partners3. "Triple E" refers to the three EU lifelong learning instruments - recommendations of the European Parliament and of the Council - the principles of which it

According to CEDEFOP's Terminology of European Education and Training Policy, second edition (2014) "non-formal learning" signifies "learning embedded in planned activities not explicitly designated as learning in terms of learning objectives, learning time or learning support. Non-formal learning is intentional from the learner's point of view". Vocational education and training provided by banking institutes, other VET providers and banks' training departments fall under this category. 2 According to CEDEFOP (2014) "qualification" signifies, among others, "the formal outcome (certificate, diploma or title) of an assessment process which is obtained when a competent body determines that an individual has achieved learning outcomes to given standards and/or possesses the necessary competence to do a job in a specific area of work." 3 For details regarding the Triple E Consortium: http://www.ebtn-triple-e.eu/ 1

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E ke planiﬁkuar jetën në pension

! I N A T O L L I F

GËZO NJË PENSION TË LUMTUR Sigurimi i jetës në pension, është një kulturë suksesi Pavarësisht nga profesioni që keni, të gjithë ju kërkoni siguri për të ardhmen. Një element kyç i jetës tuaj, do të jetë pensioni që përﬁtoni. Në Credins bank, ne ju ofrojmë mundësinë të ﬁlloni investimin tuaj në fondin vullnetar të pensionit përmes Sicred Pension. Na kontaktoni në një nga 56 degët tona për të mësuar më shumë.

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info@bankacredins.com

embodies: the European Qualifications Framework (EQF), the European Credit system for Vocational Education and Training (ECVET) and the European Quality Assurance Reference Framework for Vocational Education and Training (EQAVET). The Standard specifies how a non-formal qualification should be designed and executed. It does not deal with the technical content of a qualification and therefore it is not a certification tool for individuals; it is an accreditation proposal for institutions seeking recognition of the quality of qualifications they provide. In short, the Standard (figure 1) consists of three pillars, which provide the outline of what is required from Triple E qualifications: the central (blue) pillar shows the Features characterizing a Triple E qualification, while the other two pillars include the tools and processes to be carried out, in order to fulfill the Features. The requirements depicted in the red and green pillars are further elaborated and explained by the Triple E Guidelines that complement the Standard and define how these are to be implemented in the design and execution of Triple E qualifications. In addition to this framework, EBTN has created an accreditation process and installed an independent committee for the reviewing of applications. The first

for the banking sector, ensuring that the training it provides matches the actual needs of the market. The assessment of learning outcomes has been an important consideration ever since 2006, when HBI introduced the EFCB program in Greece, a 120-hour training on foundation banking studies, leading to the acquisition of EBTN's European F o u n d a t i o n Certificate in Banking. In the same year, the HBI designed and started offering the 62-hour program: "The Compliance Function in Banks", which runs to this day, having attracted the majority of compliance officers in Greek banks. Both programs end with an assessment in the form of written exam. Moreover, HBI experts work with

applications are expected before the end of the first semester 20164. The main task of HBI, the vocational education and training arm of the Hellenic Bank Association, is to design and implement professional training programs

the Training and HR Divisions of banks to develop tailor-made courses for incompany training and certification in topics such as Financing Small and Medium-Sized Enterprises. In the process of designing, imple-

4 5 6

menting and reviewing the abovementioned qualifications and in order to ensure the quality of its services, the HBI monitors and adopts European best practices. For us the Triple E Standard and the criteria it sets for a qualification, such as the clear description of its learning outcomes, the objectivity of the assessment leading to its acquisition, the obligation to regularly review its content and the mandatory CPD5 activities required of Triple E qualification holders in order to keep their knowledge and skills updated and thus maintain their title, are essential in upgrading the quality and promoting the comparability of qualifications. We have already embedded most of the Triple E provisions in our operation and we are working towards our re-accreditation for EBTN's completely revised Triple E EFCB6. In order for the Triple E proposal to work as expected the key challenge is its adoption in the largest scale possible by training providers throughout Europe. I hope that the following figure gives all interested parties good reason for this.

For details concerning the Triple E Standard and the related accreditation process: http://www.triple-e-ebtn.eu/ Continuous Professional Development. All European institutes that were accredited to provide EFCB have to undergo a process of re-accreditation for the new Triple E EFCB.

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Experts' Forum

Success in retail banking: A jigsaw beyond loyalty

Although nowadays the bank branch remains the main contact and access platform for customers, it has already lost its exclusive role as the sole service provider, while it is losing ground, in terms of direct sales

by Redi MËRTIRI Head of Retail Department UNION BANK

anks, in the course of their activity, have clear and similar objectives and expectations, which have not really changed for a long time, where some aim at achieving a certain and constant profit level, or expanding their market share, whereas most of them aim at achieving a combination of both approaches. It can be said that the majority of businesses today have similar objectives, as it was used to be in the past. On the other hand, individuals have a variety of needs and expectations, so the segmentation according to customers’ categories, thus providing products and services which satisfy their expectations, remains a continuous challenge. The situation seems even to be more complicated while considering that current models must be frequently modified, urged by the rapid changes affecting the society, in a time when individuals are asking more

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personally-tailored banking products, offered at very high standards within a very short time span. The bank customer today is very well informed and shows different behaviors, compared with the one of few years ago. All of this is linked with the level of communication. It happens randomly that most of us would worry much about not having the mobile phone with us, rather than the portfolio, thus evidencing the importance of communication and facilities linked with it, compared with possessing bank cards or cash, at least in the short term. The development of communication channels that suits the customer’s behavior without losing key elements of banking business, is undoubtedly the most important challenge of the banking sector, which will remain as such, even in the future. Although nowadays the bank branch remains the main contact and access platform for customers, it has already lost its exclusive role as the sole service provider, while it is losing ground, in terms of direct sales. Thus, some new channels, named “call centers”, which offer specialized trainings, are equally effective in sales, having at the same time the advantage of reducing costs and

processing time for banks and customers, as well. When it comes to Albania, as in all other countries, it is experiencing high rates of development in the communication and technology sector and, which are unavoidably reflected at banking industry. However, the pace of development has not been the same, as in other areas of the economy. If 10 years ago the banking industry in general, and

Banks must seek and expand cooperation with other business sectors, in order to have a simplified sales process and to realize maximum profits. Cooperation, especially in terms of reducing costs and increasing sales, can and should be done between banks, which are certainly in competition, but not rival to each other.

retail banking in particular, were amongst the most developed sectors in Albania and comparable in infrastructure with that of western countries, it has already lost the first place. Nowdays, there are many companies which provide services based upon the latest technology and efficient structures’ models, by offering advantages for customers and, therefore, satisfactory profits for themselves. To some extent, it can be said that there is a justification for Albanian banks, which have been long launched mobile and online banking services for their customers, mostly free of charge, or at reduced prices. Notwithstanding the increasing trends, the level of use is still far away from other countries in the region. Currently, Albanian customers cannot be defined as low internet, or social channels user, but it seems that they have not fully embraced and make use of remote electronic payments. Based on this phenomenon, there is a dilemma on banks, which invest in relatively high-end electronic platforms, which still do not justify their direct costs of investments. Another phenomenon that has affected the way of doing banking business in the country, during recent years, is the relatively obvious intervention of regulatory and legislative bodies into the banking sector. The list of banks’ daily activities has seen new entry tasks, like: transparency strengthening, consumer protection, suspicious activity reporting, etc. Despite the difficulty of adapting to ever-changing regulations and increasing efforts to comply with them, it can be said that banking sector has responded efficiently to all these changes. Thus, banks are now more transparent with customers, by offering them high quality services, and at the same time, using positively the legal framework to bring into banks more individuals with various financial needs. However, the legal changes, on the other hand, have been associated with an increase in the level of information, which has contributed to a reduction in the number of loyal customers, at a particular bank. Albanian bank customers do not follow the bank with which they maintain their main relationship, rather than the

product which meets better his demands. As another positive development, which serves to small customers in the country, is the refocusing of banks’ attention toward the individual, as a direct consequence of lending crisis and decline of businesses’ share in total sales and profit. Banks now promote more retail products, which meet the needs and suit more and more to different categories of individuals. From consumer perspective, the Albanian banks may be moving in the right direction, but the pace of development must be higher. This is because: • In terms online services, it is inevitable that the Albanian customer will follow trends of other countries and the low use of electronic banking channels can only be a result of feeble advertisement and insufficient promotional campaign. Promotion and boosting of online services, which have been implemented by several banks, must be accompanied in parallel with simplified operational processes and procedures. In this way, systems and technology will serve the individuals and not the opposite. The benefits of reduced costs, as a result of online payments and services, mean more free time for

employees, and therefore, a better focus of branches on sales processes and services to customers. • Specialization plays an instrumental role, in such a fragmented sector. Although products seem to be almost similar, customers and their needs are different, from one bank to another. In this way, it may be more efficient focusing not on the whole customer segment, but only on some categories, which are served with the best products and from which maximum benefits can be obtained. • An important aspect to remember is that the provision of banking services is a very small part of total household needs. Consequently, banks must seek and expand cooperation with other business sectors, in order to have a simplified sales process and to realize maximum profits. Cooperation, especially in terms of reducing costs and increasing sales, can and should be done between banks, which are certainly in competition, but not rival to each other. Despite economy’s ups and downs, individuals should always be in the focus of banking sector, because it guarantees, more than any other category, a constant and long-term profit.

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Economist Corner

The profile and features of economic growth in Albania, 1992-2015 Economic growth has been largely based on consumption, remittances and imports, and not on production, investments and exports ... it has been more of an extensive quantitative nature rather than a qualitative economic growth, stemming from high efficiency, technology innovation & modern sectors and activities.

by Prof. Dr. Adrian CIVICI President, EUROPEAN UNIVERSITY OF TIRANA, UET

conomic growth is the keyword for the health of any economy, opportunities for stable finances, employment opportunities and unemployment reduction, consumption growth opportunities, policies for sustainable development, etc. Key international institutions such as: the IMF or World Bank, or any government in any country, confronts the pride of its success, or dealing with criticism, with the figures of economic growth that it accomplishes. Gross Domestic Product (GDP) serves as a benchmark to calculate public debt, budget deficit, public investments, foreign direct investments, fiscal burden, etc. French economist, Mr. Comeliau writes: "Are you a politician of a poor country? Just make efforts to increase national incomes. Your country is drowned in domestic and foreign debts? You cannot meet your obligations,

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and reduce them without adding up the economic growth.... Your country suffers from economic, social and territorial inequalities? Then try enlarging the "cake" size to be distributed, thus add up the economic growth to have more money available. Public budget is never sufficient to satisfy the requirements and objectives? Just improve fiscal policy and increase the opportunities for manufacturing activities in all sectors of the economy. Shareholders of companies declare increased profits? Then try adding up the production and sales volume. Looking for a job and being unable to find one? Seeking higher wages and greater consumption opportunities? Be patient, businesses are waiting for the economic conjuncture and the economic growth rate to be improved, in order to meet these requirements. Naturally, when it comes to economic growth we have to consider numerous debates and discussions of economic, financial and social nature, that do not fetish or consider it as a magic stick that would solve everything, but instead recommending that its analyses and assessments must be always accompanied with questions the conclusions, like: to what extent the economic growth is

transformed into economic and social development? Is it "translated", and how, into prosperity and progress? Does this mean a quantitative or qualitative growth? How does the economic growth impact the sustainable development? What is the relation between economic growth and financial and banking stability? Are we witnessing a "friendly" economic growth, or an "aggressive - destructive" one for the environment? How satisfied the public feels with such economic growth and its respective effects on everyday life? In this

The economic growth and fiscal sustainability vastly depends on public investment implementation and bank credit. Over 85% of financing of the economy and consumption comes directly from the banking system, while in developed countries such indicator is nearly inverted, in favor of the financial markets, stock exchanges, investment funds, private sector industry, or services, etc.

view, the economic growth is regarded as a "thermometer" or "litmus", which on one hand reflects and witness the state of the economy and financial system, whose efficiency and capacity are reflected in the economic growth rate, and on the other hand, it reflects practical opportunities and results for accomplishing a series of economic, financial and social policies, which are substantially dependent on incomes, produced exactly out of economic growth. In this sense, "the portrayal of economic growth", "its major features" confront us clearly with the responsibility for building a sustainable, well & efficiently - structured economy, capable to weather crises, or hardships, arising from business cycles and major structural reforms, as well with responsibilities for social policy, sustainable development, etc. By synthesizing several essential components of economic growth in Albania during the last 25 years of transition, we may depict some key features that characterize it, and in this way, analyze the key factors leading to a stabilization of the sustainable growth, as well as identifying the most important courses of its funding and support, such as: Economic growth during these 25 years has been of an erratic nature, i.e. it has experienced significant fluctuations which have reflected the features of the Albanian transition - starting from a very low economic basis, continuous political conflicts, serious social unrest in 1997 and 1998, the effect of structural and transforming reforms, in the frame of agreements with IMF and WB, from 1992 till now, favorable international or regional and global economic situations, ore the global financial crisis, the economic situation of neighbors, such as: Greece and Italy, etc. We have been growing at 5-6% in 1994-96, scored a negative growth in 1997, it reached nearly 8% in 2008, to follow dropping at 1.3% in 2012, whereas during the last 2-3 years strenuous efforts are made to target passing the 3% ceiling. Even forecasts by the Ministry of Finance, IMF, World Bank or EBRD, do not see any surpassing of the 4-4.5% ceiling, at least

before 2018 - 2020. Such figures confirm the fragility of GDP performance and its high dependence on "external factors, or extra - economic and financial ones", in the sense of not closely related to the economic structure and its efficiency, or the effects of structural reforms. Economic growth has not produced the expected symmetric positive side effects. In other words, it has not moved in tandem with employment, thus being away of "Okun’s Law", i.e. symmetric relationship between employment growth, and economic growth. Albania is among the countries which prove a weak cause-and-effect relationship between economic growth and reduced unemployment. Throughout many years the unemployment has used immigration in countries like: Greece, Italy, Germany, etc., as a discharge valve. Economic growth has produced disparities in regional, territorial and social development. However, it seems positively related with the level of poverty. Studies show a positive correlation between economic growth and poverty reduction, thus a more inclusive growth. For example, during the period 2002-2008, when economic growth moved from 4.2% to 7.5%, the poverty fell from 25.4% to 12.5%, while the 1.3% decline in 2012 led to relative increase of poverty. Labor markets play a limited role in poverty reduction, as only 50% of total household income comes from labor wages. The labor market continues to lack the optimal flexibility and absorption ability, by reflecting structural deficiencies of the national economy. The economy evidences little demand and quality jobs that require high levels of training and education, whereas thousands job vacancies, like "craftsmen" who seek simply "vocational training", are widely advertised. Another paradox for the Albanian economy is the high rate of "voluntary unemployment", which is mostly a result of low salaries offered by businesses, or various economic sectors, which discourage jobless people to join the labor market. Economic growth has been largely based on consumption, remittances and imports, and not on production,

investments and exports ... it has been more of an extensive quantitative nature rather than a qualitative economic growth, stemming from high efficiency, technology innovation & modern sectors and activities. For example, during the period 2000-2008, total consumption accounted for nearly 64% of aggregate demand growth, while during the period of the global financial crisis such figure has been steadily shrinking. The economic slowdown, which began after 2008, caused a decline in labor demand, resulting in a reduction of household income and consumption. Meanwhile, if we analyze the structure of creating new jobs in the last 10-15 years, it results that the majority of employment was in services industry with low quality and standard, contract manufacturing industry, call centers, etc. When it comes to capital, or the amount of investment needed to create a new job, the figure comes up to the minimum of EUR 3000 - 5000 per job, whereas the efficient employment – which requires well – prepared and efficient human resources – stands between EUR 20.000 to 30.000 for a job, and such jobs are naturally paid with much higher wages. As the World Bank puts it, it is a fact that, in Albania "productivity has a weak impact on growth; total factor productivity, labor and human capital, or capital stock per work unit, has been decreasing, during 2000 – 2014.” Economic growth continues to be very sensitive to public investments and loans from the banking sector - while the opposite must have occurred; the private sector and the financial market need to originate the bulk of financing. It is a fact that economic growth and fiscal sustainability vastly depends on public investment implementation and bank credit. Over 85% of financing of the economy and consumption comes directly from the banking system, while in developed countries such indicator is nearly inverted, in favor of the financial markets, stock exchanges, investment funds, private sector industry, or services, etc. Financial markets continue to be still in their embryonic stage; even the access to financial services continues to be low,

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compared to other regional countries, let alone the EU countries. This is the best explanation why the weak credit growth or high figure of non-performing loans, have a direct effect on the weak economic growth rate. Economic growth and its convergence with regional and European economies. When analyzing the structure of the Albanian economy, its efficiency, competitiveness, wage levels, prices, etc., usually it is little associated with specific policies that ensure convergence and bring us closer to the region and EU. Many economic, financial and social indicators are lagging behind those of the region and the European average. We need a stable economic growth at 5-6%, in a way to shore up the possibility of any approximation or convergence, especially with the EU average. According to calculations made by the World Bank, it will take about 36 years for Albania, with a growth rate of 4.5% to reach the average income per capita of EU countries, while a sustained 6% economic growth, shorten it to 25 years. However, referring to medium-term macroeconomic

projections, Albania plans that a 5 - 6% economic growth may be realized after the period of 2018-2020. The economic growth has been and remains the subject of numerous hot debates and discussions in Albania. Besides abuse, in the context of political conflicts, which confronts the growth figure, provided by INSTAT, with political ire and chronic distrust for its authenticity, it is also fueled by the fact that data collection is difficult, in a time when we cannot make real time corrections and measurements, as a result of difficulties in coordination among institutions, in terms of transparency of public and private finance ... taxes, treasury, ministries, customs, INSTAT, BoA, banks, etc. Naturally, such a reality hinders the efficiency of public policies and decisionmaking in the private sector or FDIs. Economic growth and new economic model, or "the new economic modeling which consists in the contribution of various sectors to GDP". World Bank opened this debate back in 2005, with a study on factors impacting the sustainable growth and development in Albania,

whereas we have spent a full 10-year period by not giving a comprehensive answer of a strategic nature, like: What are the objectives and strategies for a structural change in the contribution of economyâ&#x20AC;&#x2122;s branches and sectors to GDP, for the next 10 or 15 years? How the "holes", caused on the GDP performance and stability by the construction sector, remittancesâ&#x20AC;&#x2122; reduction and limited possibilities of privatization, will be replaced and filled up? At what extent the economic growth is dependent from structural changes in our economy? Do we have already a clear strategy of economic and financial development for the next 20 years, with clearly - defined priority branches and sectors?, etc. As long as we remain without a direct answer to such issues, it will be difficult to feel fully confident that our economic policies, business climate, fiscal and budgetary policies, etc., will be heading towards the right direction. The most important point here remains the prevalence of the philosophy, which seems already understood, that growth should be driven by investment and exports, and not by consumption and imports.

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Social Capital

“Leader for a Day” On 23 March, 2016, the bank joined the event organized by Junior Achievement Albania (JA): “Leader for a Day 2016”. Some 46 excellent senior high school students & JA achievers from schools around the country shadowed 46 high profile leaders of the business world and diplomatic arena. The selected participants were engaged on different work processes of a leader and became aware of the expectations and commitments of being leaders and decision makers. “Bonus” Reward Program with American Express Cards of Alpha Bank On 23 February, Alpha Bank - Albania organized an event, on the occasion of successful issuance of the reward program: "Alpha Bank Bonus". Through this program, all holders of prestigious "American Express" card in Albania receive a refund for their purchases at "Carrefour" supermarket, "Fashion Group" shops (Carpisa, Geox, Golden Lady, Golden Point, Mango, Okaidi, Parfois, Prenatal and Springfield), "Gulf" gas stations, "Hygeia" Hospital and "Neptun" shops’ network.

National Center for Blood Transfusion BKT, in view of its mission to support health institutions in order to improve conditions and the services provided, had contributed for the reconstruction of premises at the institution. Hospital Centre “Dr. Sadik Dinçi” Elbasan BKT, as part of the program to improve the conditions of health institutions, has donated medical equipment to the institution, in the frame of providing quality services for patients in Elbasan district and by increasing the range of laboratory analyses, performed in the hospital’s laboratory.

- Helped in accelerating, facilitating and formalizing the Albanian businesses, by creating a product dedicated to the purchase of Fiscal memory devices.

- Supported "Studenti" Sport Club in volleyball and football, by improving infrastructure and sports facilities. - Supported Public Centre for the Elderly in Tirana, one of many state institutions that provides care for the elderly. Other institutions for vulnerable groups were supported, such as, children without parental care, disabled persons and victims of violence and trafficking.

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- Supported the initiative undertaken by the Tirana Municipality: "Adopt a kindergarten".

During the first 3 months of the year banks contributed in some sectors:

- A responsible employer of equal opportunities in employment and career. During January - March 2016 the bank employed 30 new employees.

American Investment Bank (ABI Bank) launched its new corporate marketing campaign and video: "Invest in optimism! ... Gratitude and respect for our people and country." This campaign puts optimism at its center, which serves as a value and motivation promoting engine to realize any dream, effort and new initiative, and it is fully compatible not only with bank’s mission, but also with ABI Bank’s newly launched slogan: "Invest in optimism". ABI Bank believes that the focus of all stakeholders for developing important sectors of the economy will have a long lasting positive impact on the banking system and the economy, as a whole.

lic and supported the event organized at the Palace of Brigades, to raise awareness for children and individuals with Down syndrome. Joined the initiative: "Let’s make our city more green." Credins Bank supported Tirana Municipality by planting 1000 Oleander plants through the Ring axis.

- About 1,000 families in need in all Albanian cities where Credins Bank branches are located, received support with food products. - Joined the initiative of President of the Repub-

In February 2016, International Commercial Bank received the Report: Green 2015: "Caring for our common home", which summarizes the activities of trash recycling, implemented by the International Commercial Bank (ICB) in 2015, along with Green Recycling company and its measures their positive impact on environment. ICB showed strong commitment to trash recycling and protecting the environment. The findings suggest that the Bank's environmental policy is tightly embraced by its employees. Support program for stray dogs in Tirana Employees of the International Commercial Bank contributed voluntarily, in March 2016, in support of the sterilization project for stray dogs of the capital, a project undertaken for the first time by the Municipality, in cooperation with the Agency of Consumer Protection and with a group veterinarian (surgeons). "Leader for a Day" By supporting the Junior Achievement program, and the initiative: "Leader for a Day", International Commercial Bank welcomed on 23March 2016, Elsa Gjoci, an excellent student, from "Ibrahim Muça", High School, Librazhd, assigned by the program itself, to spend a full day working with Mr. Akan Aydin, Head of SME & Corporate Department. During the ceremony held by JA, the bank received the award: "Junior Achievement of Albania, Gratitude".

Social Capital

Bank employees volunteer teaching in High schools the Junior Achievement Business Modules The bank, in cooperation with Junior Achievement Albania, offered to its employees the opportunity to join teaching for few subjects for 11th and 12th grade in high schools, like: Ethics in Business, Abilities for Success, Become an Entrepreneur and Students’ Societies. Some 16 volunteers participated in this initiative. Plastic Cap Collection Intesa Sanpaolo Bank Albania is continuing, during 2016, the great cooperation started in 2014 with the Albanian Cap Project. All colleagues, clients and stakeholders are collecting plastic caps and with the money earned from the recycling the NGO buys wheel-chairs for the disabled people who cannot afford buying them

“Leader for 1 Day” On 23 March, Intesa Sanpaolo Bank Albania welcomed Sara Shameti, a student from “Ismail Qemali” high-school. She followed, for one full business day, the agenda of Head of Human Resources Department in all meetings, conferences and seminars, sharing personal experiences, academic background, career pursuits, major challenges and lessons learned throughout the professional life, along with some of the highlights and key successes in her career.

CSR Initiative Calendar of 2016 based in the 17 UN Sustainable Development Goals All colleagues are getting involved in creating and participating in initiatives and activities on voluntary base, during 2016, in compliance with the 17 Objectives for the Sustainable Development, defined by UN. Aiming to raise awareness and make all of us feel the importance of our daily support for the achievement of these global goals, a calendar of 2016 CSR activities is being prepared and will be shared through internal communication channels.

President decorates Raiffeisen Bank Albania with the title: "For special civic merits" His Excellency, Mr. Bujar Nishani, President of the Republic, organized a gala evening with representatives from business community in Albania, which was held at the Palace of Brigades. Alongside other major companies, the President of the Republic awarded Raiffeisen Bank the title: "For Special Civic Merits", which was submitted to Mr. Christian Canacaris, Chief Executive Officer of Raiffeisen Bank - Albania.

Raiffeisen Bank sponsored the event: "Protect your privacy during online navigation", an initiative taken by the Commissioner for Information Right and Data Protection, in cooperation with the Ministry of Education and Sports, which was held in the form of a competition with painting and essays from students of 9-year schools of all the country. About 500 students brought their works, where the best out of them were exhibited at the Art Gallery during the event, which was organized on this occasion.

Poverty does not have age In cooperation with civil society, the project focused on a list of 40 children, living in difficult conditions in Sinjë area, of Berat. The bank collected various gifts from staff and individuals.

Continued support for SOS children's village The Bank continues its commitment to "adopt" three SOS children's village.. Supporting the State Police The Bank supported the General Directorate of State Police and the Police Academy, by contributing with laptops and computers.

Union Bank Staff making charity Bank staff distributed gifts to the care center for adults: “We for you" and "Barricades 2 + 3" kindergarten in Berat and Lezha, for the care center for children and adults "Roses" and to the kindergarten which supporting the initiative: "Every Roma child in kindergarten". Sponsorship for art In the frame of sponsoring artistic activities in the country, Union Bank sponsored a photographic exhibition of Prof. Adam Lazowski. 8 March at Union Bank

The 8 March day was celebrated with flowers for clients at Union Bank branches. A kind surprise was also flowers sent in some workplaces. This symbol indicates the bank and its staff’s appreciation and strong relation created with customers.

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SPECIALE The

global goals for Sustainable Development

the commitment of Albania by Bas BERENDS

n September last year, world leaders got together in New York to adopt the new Sustainable Development Goals (SDGs), which are essentially an agreed vision to put people and planet on a sustainable path, by 2030. The implementation of SDGs started on 1 January 2016, so now it is time for everyone in Albania to commit themselves to their achievement! There is no doubt that in the future, 2015 will be seen as a defining year in time; the 17 Sustainable Development Goals were adopted, with inclusive development and environmental protection at its core. Furthermore, in November, we witnessed a global willingness to seriously combat climate change. At the COP21 meeting in Paris, an agreement was reached to limit the warming of our planet to less than 2 degrees, compared to pre-industrial levels. This is essential if we want to make sure that climate change does not irreversibly change life on Earth. A third conference, in Addis Ababa, focused on innovative measures to finance the new development agenda. These three key meetings in New York, Paris, and Addis, were all led by the United Nations, in the year that it celebrated its 70th anniversary. Together, the Paris Agreement and the Agenda 2030 on sustainable development will form

Environment Advisor & SDG Focal Point, Resident Coordinator’s Office, UNITED NATIONS - ALBANIA the foundations of a new development agenda that can put the world on a course of action to end poverty, fight inequality and injustice, and protect the planet. It is important to underline that the Sustainable Development Goals were developed during a two-year global and national inclusive consultative process, including here in Albania. Many actors had their say in the final definition of the goals and the targets: governments, the private sector, and civil society. In Albania, the United Nations held inspiring conversations with around nine thousand people across the country, through surveys called: “The Future We Want”, “Voices from Albania” and “My World”. We got a clear picture of the world Albanian people want to live in, with better job opportunities, better education, and access to better and affordable health care services. These stories fed into the discussions about what the SDGs should be about. People called for a stronger role of public institutions for social protection and delivery of basic social services. This can be related to SDG 16 on strong institutions and SDG 3 on good health and well-being. The people that were interviewed also wanted a coordinated action between government and business

to create jobs through innovation and partnerships. This feeds into SDG 8 on decent work, as well as SDG 9 on innovation. Furthermore, respondents called for natural resources management and a transformation of consumption patterns, which ties in, for example, with

A Middle-Income Country like Albania needs to focus on allowing people to exit poverty through education and jobs, and make sure people do not fall back into poverty by providing social protection and financial assets. Here, the private sector, including the banking sector, could be involved.

SDG 15 life on land and SDG 12 on responsible consumption and production. The Sustainable Development Goals by the way are not totally new. Millions of people’s lives have improved, due to efforts to achieve the Millennium Development

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Goals (MDGs), the first set of goals that were established for the period between 2000 and 2015. At a global level, MDGs targets have been met on reducing poverty, increasing access to improved drinking water sources, improving the lives of slum dwellers and achieving gender parity in primary schools. In Albania, great progress has been made in the area of child and maternal mortality, whereas we have seen mixed results in the area of education and environmental protection. Over the past 20 years, the likelihood of a child dying before age five has been nearly cut in half. Globally, the maternal mortality ratio dropped by nearly half. Enormous steps have been made, showing the value of a unifying agenda underpinned by goals and targets. Yet, despite this progress, the indignity of poverty has not been ended for all. This is also the case in Albania, where poverty levels initially declined but have recently been on the up again; the same holds true for unemployment. The MDG experience proves that setting goals and targets works, and the UNâ&#x20AC;&#x2122;s work in Albania has been guided by these. To name but a few examples: we have helped the government implement the Territorial and Administrative Reform. Together with government, civil society and the business community, UN

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Agencies have put gender equality, as well as violence against women, high on the agenda. The socio-economic situation of the Roma and Egyptian communities has improved also thanks to UN support. We have contributed to progressive health policies and reforms. UN support has enhanced the employability of youth and vulnerable groups. And we are assisting in unlocking the potential that Albania has when it comes to energy efficiency and renewable energy, in order to fight against climate change. The SDGs are supposed to tackle any of the unfinished business of the MDGS, as well as focus on new targets that have to do with inequality and sustainability. One of the main challenges for Albania lies in the area of governance, and it is courageous that the Albanian government has signed up for a special SDG pilot on governance issues, which will focus on a wide ranging set of indicators, related to judicial and police performance, transparency of public expenditure, access to water and youth employment. The 2030 Agenda for Sustainable Development has now arrived at the implementation stage, and it is up to many actors in society to play a role in making sure that the global goals do not just remain an empty piece of paper. Governments around the world, including the Albanian

one, may have signed the documents, but they need their citizens, businesses, academia and other professionals to help put them into practice. This would include new partnerships, for example, with the financial sector, to fund initiatives. You could think of special loans for renewable energy, or energy efficiency measures, micro-credits for farmers to implement climate resilient agriculture, but also more internship for young people that are looking for a job. A Middle-Income Country like Albania needs to focus on allowing people to exit poverty through education and jobs, and make sure people do not fall back into poverty by providing social protection and financial assets. Here, the private sector, including the banking sector, could be involved. The Global Goals help us focus on our shared challenges. With these new, interconnected Sustainable Development Goals that apply to all, we can go much further to end all forms of poverty, ensure no one is left behind, tackle unsustainable practices and chart a dignified future for all people in all countries. Success in this new ambitious agenda for global action will be driven by leaders within government, business and civil society, especially at the local levels. The UN in Albania stands ready to team up with all our partners to make the SDGs a reality.

Auditori Financiar

Syndicated Lending

A simple explanation of complex loans By inviting banks to participate, the seniors can avoid excessive exposure to a single borrower, while still earning a fee for their origination expertise, including contract design, pricing and distribution services. So, loan syndication is a way for the bank to solve an inherent tension between the benefits of specialization and the benefits of diversification

by Sonila TAĂ&#x2021;I, MBA, MA Head of Financial Statistics Sector, Statistics Department, BANK OF ALBANIA

syndicated loan is a credit granted by a group of lenders, typically banks, but only, to a borrower. Every lender has a separate claim on the borrower, even though there is a single loan agreement. In this case, there is typically an originating bank (or group of originating banks) that conducts the credit analysis, prior to granting the loan and also negotiates the pricing structure of the loan. These originating banks, called the senior syndicate members, are appointed by the borrower and provide the key financial intermediation services of resolving pre-contract informational asymmetries and designing the loan contract. The other members in the syndicate, called the junior banks/ members, provide a portion of the funding. The numbers and identities of the juniors vary depending on the size, complexity and pricing of the loan, as

well as the borrowerâ&#x20AC;&#x2122;s willingness to expand its banking relationships. Why syndicated lending is important and applicable? One of the main reasons is the need for the senior lenders to diversify their credit risk exposure. By

Syndicated lending has been very popular in United States domestic lending for many decades. However, since the 1970s, the practice has become an important part of the international lending, as well. In the international market, loan syndications first developed as a sovereign lending business. A revival of syndicated lending occurred in the early 1990s, and now syndicated lending has become the biggest corporate finance market in the United States and in key worldâ&#x20AC;&#x2122;s biggest economies, as well as the largest source of underwriting revenue for lenders.

inviting banks to participate, the seniors can avoid excessive exposure to a single borrower, while still earning a fee for their origination expertise, including contract design, pricing and distribution services. That is, loan syndication is a way for the bank to solve an inherent tension between the benefits of specialization and the benefits of diversification. For the junior lenders in the syndicate, syndication enables participation without the costs of origination expertise. That is, these banks can diversify their loan portfolio by adding credits that they lack the expertise to originate themselves. Moreover, it exposes the junior bank to the borrower, and therefore creates the possibility of a future relationship that is deeper and more profitable for the bank. An example of a syndicated loan structure is provided in the figure below. The Market for Syndicated Loans Syndicated lending has been very popular in United States domestic lending for many decades. However, since the 1970s, the practice has become an important part of the international lending, as well. In the international market, loan syndications first developed as a sovereign lending business. In fact, just prior to the sovereign

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GRUA SIPERMARRESE? ME NJE MIKE PERKRAH JE GRUA E SUKSESSHME MENDUAR SI PER VETE FINANCIM & KESHILLIM

MBESHTETJE FINANCIARE NEPERMJET KREDIVE TE DIZENJUARA PER JU, NORMA TE ULTA INTERESI PERIUDHE “GRACE“ – PAGUAJ VETEM INTERESA RIMBURSIM I PJESHEM I INTERESIT - BONUS PER PAGUESIT E RREGULLT TE KREDISE MUNDESI PER TE SPOSTUAR RIPAGIMIN E KREDISE DERI NE 6 KESTE MUJORE NE RASTE SHTATEZANIE KESHILLIM NGA EKSPERTET E BERZH-it & PLATFORMA ORJENTUESE “BUSINESS LENS” - FALAS PAKETA PRODUKTESH & SHERBIMESH TE DEDIKUARA PER JU

SYNDICATE - Organizes and structures the syndicate, - Negotiates terms, originates the loan and carries all administrative procedures

CLIENT

- Invites participants, - Negotiates participation terms, - Discloses Information

ARRANGER & BOOKRUNNER

- Provides funds

BANK 1 BANK 2 BANK 3

default by Mexico in 1982, most of the developing countries’ debt consisted of syndicated loans. The repayment difficulties experienced by Mexico and other sovereign borrowers in the 1980s resulted in the restructuring of Mexican debt into Brady bonds in 1989. As a consequence, emerging-market borrowers gravitated toward bond financing, causing a shrinkage in the syndicated lending. A revival of syndicated lending occurred in the early 1990s, and now syndicated lending has become the biggest corporate finance market in the United States and in key world’s biggest economies, as well as the largest source of underwriting revenue for lenders. What Is a Loan Sale? A loan sale is similar to a syndicated loan in that the originating bank is able to ensure that part of the funding for the loan comes from other lenders. There are two kinds of commercial loan sales: loan strips and loan participations. A loan strip is a short-term share of a long-term loan. When the strip comes due at the end of a given period (for example: 5, 30 or 60 days), the selling bank must repay the strip holder the contractual amount. In essence, funding has dried up for the loan at that point in time. Typically, it resembles somehow to repurchase agreements (REPO). To continue funding the loan, the origination bank must resell the strip for another period of providing funding itself. A loan sale without recourse removes the loan from the seller’s books and thus does not require reserves or capital to be held against it. The issue is less transparent for strips since they expose the bank to refunding risk. In January 1988, FASB determined that loan strips could be recorded as sales if: (i) the buyer of the 1

strip assumes the full risk of loss, and (ii) the lender has no contractual obligation to repurchase the loan strip. Loan Participation Like syndicated lending, loan participation is a multi-lender financing arrangement. It differs from a loan strip in that it is an outright sale of a loan. Participations are loans where the lead lender (‘‘Lead’’) sells a participation in a loan to one or more participation lenders. The Lead continues to manage the loan on behalf of the participants. The relationship among the lenders is typically formalized in a participation agreement, which stipulates that the participant receives an undivided interest in the loan. The sale of the loan to participants typically occurs after the loan documentation has been executed by the Lead and the borrower. Unlike a syndicated loan, the participants do not contract directly with the borrower. The Lead negotiates the loan terms with the borrower, receives all the payments from the borrower and collateral is maintained by the Lead in its own name. Participants make advances to the Lead, and these take the form of purchases of participation interests. The advantage of a participant rather than being a junior lender in a syndicated loan is that the lender does not need a separate contract with the borrower and can deal solely with the Lead. Thus, the loan participation is very much like a pure transaction loan or capital market investment. The advantages of being a junior lender in a syndicate rather than a participant are twofold. One is that the junior lender does not have to worry about the additional risk that the Lead may become insolvent. The other is that the junior lender in a syndicate can hope to develop a relationship with the

borrower, something that is less likely for a participant. From the standpoint of the Lead, one advantage of the loan participation, relative to a syndicated one, is that it retains exclusive control over its relationship with the borrower and does not invite potential future competition for relationship lending from the junior lender in the syndicate. The advantage of a syndicated loan for the senior lender is that, because the juniors have direct relationships with the borrowers, the senior lender can free up its own capital in an amount of credit extended by the junior lenders. Choosing between Loan Syndication and Loan Sales The syndicated loan market and the market for loan participations have developed because they offer distinct economic advantages for borrowers as well as lenders. For the borrowers, syndicated and participation loans offer some of the advantages of relationship borrowing, along with some of the advantages of transaction borrowing (such as liquidity and hence a lower borrowing cost). For the senior lenders, loan syndication permits exploitation of their origination expertise in resolving pre-contract informational asymmetries and negotiating pricing terms, while also enabling them to diversify their credit risk exposure. The same is true for the Lead in a participation loan. For junior lenders, the benefits of loan syndication are the ability to diversify into sectors in which they lack origination expertise and to possibly develop a relationship with the borrower that could be deepened in the future. For participants, the benefit of loan participation is the ability to diversify into credits where they lack relationship and/ or origination expertise.

Financial Accounting Standards Board.

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AAB Trainings Project Management Advanced Level 25 - 29 January

Emotional Intelligence 15-16 March 2016

Supporting Employees through Organizational Change in the Banking Sector 26 January

Win-Win Negotiation 10-11 March 2016

Fraud Detection and Prevention 8 - 9 February

Manage your energy not your time 17-18 March 2016

Regional Seminar on better implementation of AML regulatory framework 16 February

Customer Relationship Banking 23-24 March 2016

Retail Banking and New Distribution Channels 24 â&#x20AC;&#x201C; 26 February

Bank Liquidity Risk Management in the Basel III & Capital Requirements Directive IV (CRD4) Framework, 25 March 2016

AAB Activities

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Activity with media representatives 14 January

Banks â&#x20AC;&#x201C; Businesses meeting - 3 March

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