Bankieri No.7 - April 2013 by Shoqata Shqiptare Bankave

No. 7 April 2013 Publication of Albanian Association of Banks

MERGERS & ACQUISITIONS

Ante Portas?

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Nr. 7 April 2013

Contents

Publication of Albanian Association of Banks

“MERGERS & ACQUISITIONS”

Ante Portas?

EDITOR’S DESK M&As in the Albanian banking system… ante portas? by Elvin MEKA

p.5 Bankieri

FRONTLINE M&As in Albanian banking system – are they coming to the limelight? by Aydin ARGIN Albanian Banking System - Is it the right time for mergers & acquisitions? by Arjan KADAREJA Historic drop of interest rates: OK but... by Ard KOLA

p.6 p.9 p.11

INTERVIEW

15 Albanian years of Alpha Bank Interview with Mr. Periklis DROUGKAS

p.13

BANKING SYSTEM The new set of banking legal and regulatory changes, very indispensable, but beyond the measures...by AAB Foreign Account Tax Compliance Act (FATCA) and Albania by Rozeta KOKALARI Albania and Basel II: How far do we stand? by Ermira CURRI

p.14

p.23

p.25

SOCIAL CAPITAL

FINANCIAL AUDITORIUM Loan Commitments by Junida TAFAJ

AAB Albanian Association of Banks Activities

Junida Tafaj (Katroshi) Coordinator Anduena Manushi Editor

Design & Layout: Ladybird Creations

Seyhan PencaBligil AAB Chairman & Chief Executive Officer, Banka Kombëtare Tregtare Ioannis KOUGIONAS AAB Vice Chairman & General Manager, National Bank of Greece Alexander RESCH Committee Member, Chief Executive Officer, Intesa Sanpaolo Bank

Bozhidar TODOROV AAB Executive Committee Member & Chief Executive Officer, First Investment Bank - Albania

p.29 p.31

Periklis DROUGKAS AAB Executive Committee Member & General Manager Alpha Bank Albania

p.32

Endrita XHAFERAJ Secretary General, Albanian Association of Banks

p.33

TECH TOPICS

Real time anti-fraud monitoring set to revolutionize fraud detection by Francisco JARAMILLO

Eftali Peçi Coordinator

Hubert de SAINT JEAN Committee Member, Chief Executive Officer, Societe Generale Albania

ECONOMIST CORNER

Interbalkan News

Elvin Meka Editor-in-Chief

Bordi Editorial: p.17

New trends of central banking - modernization or challenge? by Ela GOLEMI

BALKAN NET

Editorial Team:

p.15

p.20

A BANKER IN FIRST PERSON

Publication of Albanian Association of Banks

Printed by:

New changes and amendments at Civil Procedure Code – opportunities for more efficient foreclosures by Ejvis NDONI

Banks' activity Ryder Albania Association

No. 7, prill 2013

Gert Hoxha Photographer

EXPERTS’ FORUM

The Cypriot financial crisis – banks under the pinch of deposits’ taxation by Adrian CIVICI

BANKIERI is the official publication of the Albanian Association of Banks which mainly focus the Albanian banking industry. BANKIERI provide readers with valuable information on the financial industry's developments in general, and of commercial banks in particular.

p.37 p.39 p.42

Hysen ÇELA Managing Partner, NH EuroConsult Adrian CIVICI President & Head of Doctoral School European University of Tirana Spiro BRUMBULLI Rector - Tirana Business University Enkeleda SHEHI Chairman of Albanian Financial Supervision Authority

ALBANIAN ASSOCIATION OF BANKS Bulevardi: “Dëshmorët e Kombit”, TWIN TOWERS Tower I, Floor 6, A3, Tirana Tel: +355 4 2280 371; Fax: +355 4 2280 359 E-mail: bankieri@aab-al.org; www.aab.al

www.aab.al • BANKIERI • 3

EDITOR’S DESK

M&As IN THE ALBANIAN BANKING SYSTEM…ante portas?

The driving objectives here may be a bit unorthodox, as the most actual prevalent issues in the system are reducing risk, the difficulty of creating added value and product differentiation.

by Dr. Elvin MEKA1 Editor-in-Chief

t is not a rhetoric question rather it’s a multiple choice one. As the most complex business transaction it’s clear for banks here that their choice, whether to engage in mergers & acquisitions or not, will be based on a multidimensional and thoroughly analysis. Surely when it comes to M&A everyone thinks practically about a process aimed chiefly at cost cutting and creating value, but this is not the whole picture. As McKinsey put it: “… the strategic rationale for a merger & acquisition that creates value typically conforms to at least one of the following five archetypes: improving the performance of the target company, removing excess capacity from an industry, creating market access for products, acquiring skills or technologies more quickly or at lower cost than they could be built in-house, and picking winners early and helping them develop their businesses.” So, it is a multifaceted process, especially in the frame of the aftermath of the global economic and financial crises of 2008 - 2009. But it is not the crisis situation, which tend to shape profiles and commitments in M&As, because such processes do occur also in the most dynamic upswing peak of the economic business cycle. Therefore, it is not a matter of crisis and prosperity, but a matter of business logic. The Albanian banking landscape seems as an uncommon place for any straightforward 1

merger or acquisition, as mother banks come from different directions and represent some of the most established banks or banking groups in their country. The short experience, the Albanian banking system has shored up so far, seems to be successful (read more about it on page 6), but definitely the system is waiting for a “pure” inhouse merger & acquisition. Surely, the driving objectives here may be a bit unorthodox, as the most actual prevalent issues in the system are reducing risk (or alternatively taking on more credit risk by expanding the loan portfolio mechanically), the difficulty of creating added value and product differentiation. The first “Albanian” bank M&A will be the real milestone for the banking system, in terms of objectives, efficiency and further development. But how successful it could be? This is a-million-dollar question, and what can be said in this regard is that, it’s always a matter of whether the aimed rewards justify the risks undertaken. Unfortunately, there is no magic with successful mergers & acquisitions; since as any other business process, they are not intrinsically good or bad. Nevertheless, as Sir Winston Churchill once quoted: “It’s not enough that we do our best; sometimes we have to do what’s required!”

Head of Department of Finance, EUT-UET

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FRONTLINE

M&As IN ALBANIAN BANKING SYSTEM – ARE THEY COMING TO THE LIMELIGHT?

The Albanian M&A practice has been dynamic and it has been successfully applied in several cases during the last 10 years, but when it comes to the prospects of the M&A activity on the Albanian market, we have to initially look at the phenomena on a wider prospective. by Aydin ARGIN Corporate and Commercial Banking Group Head BKT

he Merger and Acquisition issue has been presented frequently in the international business environment, but the reasons bringing to a merger differ from time to time in the form of opportunity catching or response to certain events. The recent event to respond to is the financial crisis, and the response should be seen in this point of view. Generally, when speaking of M&A, we should address questions like the following: • Does a specific merger add value? • Does the justification for the merger proposed by management make sense? • Which company captures the value (if any) created by the merger? • Will there be takeover defenses, and if so, how will the takeover defenses employed by the target firm affect the likelihood of the merger succeeding? Many companies use M&A activities as a way to achieve growth, while others may use M&A to diversify their businesses. In any case,

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M&A activities are one of the most controversial topics in finance and are associated with complex legal, tax, and synergistic issues. Mergers and acquisitions take a variety of forms (could be friendly or hostile), but almost always someone is left unhappy (usually the managers that are removed, or workers that will be laid off). Looking back, the Nineties saw the creation of national market leaders in Europe, with cross-border mergers limited. Between 2000 and 2008, companies were focusing on globalization and the opening up of new markets and undertook crossborder mergers at an unprecedented rate. All sectors were involved, but the financial sector was the scene of outstanding transactions, culminating in the credit crunch of 2008-2009. Also, if we retrospectively analyze M&A in the Turkish banking sector experience, after the economy was hit by the two severe crisis (November 2000 and February 2001) consolidation in banking sector was assisted by government, i.e. banks in financial distress were sold to or merged with other banks/

institutions, bringing the bank number from 68 to 50 in year 2007. Another important feature of this M&A wave is that mainly foreign bidders were involved and foreign participation in banking sector assets increased to 22.7% in September 2007 from 4.3% in 2004 (CBT: Financial Stability Report, 2007). In Albania the Mergers & Acquisition practice has been dynamic and it has been successfully applied during the last 10 years and we can mention: The merger between the American Bank of Albania and the Italian - Albanian Bank, conducted by Intesa San Paolo, the Emporiki Bank Acquisition by Credit Agricole Group and the acquisition of Banka Popullore (by Societe Generale). If we have to judge on the prospects of the M&A activity on the Albanian market, we have to initially look at the phenomena on a wider prospective. If we refer to the data provided by the Institute of Mergers, Acquisitions and Alliances (IMAA), referring to transactions in Europe in 2012, they have recorded a drop by 20%, year over year. In terms of value, the financial services sector accounted for 42 per cent of all deals,

As for the Albanian banking sector, considering the market facts prevailing, M&A could be, more in the merger form, as a response to the international crisis and will therefore take specified forms that are characteristic to stabilization or mature phase of business, in which the banking industry is. and 38% in terms of deals recorded. The data are self-explanatory with regards to the market dynamics in Europe at least. Some of the biggest European deals have been influenced by the Eurozone crisis and bailing out of European banks, particularly in Spain. Adopting this trend to the Albanian banking sector, and considering the market facts prevailing, M&A, as per my points of view will prevail, more in the merger form, as a response to the international crisis and will therefore take specified forms that are characteristic to stabilization or mature phase of business, in which the banking industry is. If we look at the banking sector in Albania, we will notice that some of the players are showing trends of a decreasing asset balance, due to the consecutive losses experienced. This is a sign, as per my judgement, that leaves room for M&A, especially as the market is getting saturated and too many players cannot operate efficiently. This process I believe will come more naturally, especially

if the merging will happen between banks originating from the same country, as the challenges faced are very similar on a mother company level prospective and the knowledge of the players involved is more consolidated. Again, based on the Turkish banking system experience in the 1999 - 2000, this would be a normal process of banking industry consolidation. The core problem is the balance of benefits any acquirer could create by this transaction and this is a quite a complicated topic to be examined in a few rows. On a broader level, the reasons behind the merger could be synergies created by growth from acquisitions instead of internal development. In the stabilization phase, competition has eliminated most of the growth potential in the industry, and the rate of growth is in line with that of the overall economy. Companies in this phase seek mergers to generate economies of scale, in order to compete with a lower cost structure. They may also acquire smaller companies that can provide stronger management and a wider financial base. In this phase, horizontal mergers are the most common as the strongest companies acquire the weaker companies to consolidate market share and reduce costs.

BKT falls under this category, as a bank that has successfully achieved sustainable growth of derisible levels and has continuously gained ranking positions with regards to its peer banks. How easily can this be achieved? Easiness and M&A are two terms that donâ&#x20AC;&#x2122;t fit together. It requires a long and complex evaluation process and has two means of payment: cash offer and stock offer. The Authority of Competition is the Merger & Acquisitions Regulatory Agency that supervises the process after the preapproval of the Merger according to the Albanian Law from the Bank of Albania. During the pre-approval and implementation, certain conditions, such as Concentration Ratios like HHI (Herfindahl Hirchman Index) should be taken into consideration, so as to ensure the absence of monopolistic approaches It should be a careful and very professional process where the information confidentiality preservation should be in focus to avoid misuse of information, stock prices fluctuations or any other undesired effect.

www.aab.al â&#x20AC;˘ BANKIERI â&#x20AC;˘ 7

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FRONTLINE

ALBANIAN BANKING SYSTEM - IS IT THE RIGHT TIME FOR MERGERS & ACQUISITIONS1? The process of mergers & acquisitions M&A is likely to bring important benefits for the Albanian banking system and the economy, in terms of effectiveness, diversification and credit expansion.

by Arjan KADAREJA PhD Lecturer, EUT-UET

he banking sector is and will remain thë most important and substantial part within the Albanian financial system, in terms of support and contribution in the economic growth, as well as shaping the system in itself, during the past, nowdays and in the future to come. During the last 20 years, which coincides with the transition period, the Albanian financial system brought into light and practically developed such financial institutions and instruments even not known before, which are intertwinned with the evolution of the banking system itself. The modern Albanian private banking system is relatively new. It is predominantly created more than a decade earlier, by means of licensing foreign bank branches and subsidiaries and cross border acquisitions of old state owned banks and newly created banks. The key players in such privatizations and acquisitions were well-known European banking groups.

The impact of the last financial crisis on the overall activity of the banking system and the issues evidenced within it, will affect the future path of banking institutional approach in Albania, as the system enters a more mature phase and faces complex competition, within financial system, too. Right now, the Albanian banking system displays the features of traditional banking i.e. makes loans to the private sector and buys public debt mainly through financing by means of client deposits. Considering the earlier experience of the European Union banks, mergers and acquisitions (M&As) could be possibly identified rightway, as a likely future development with the Albanian banking system.

MERGERS & ACQUISITIONS (M&A) AS AN OPPORTUNITY WITHIN ALBANIAN BANKING SYSTEM

A great deal of literature deals with M&A in emerging markets. Fritsch et al. (2006) determine success factors of the M&A deals with a special focus on emerging market characteristics. They show that country and deal specific factors have significant explanatory power for excess returns to the bidding bank’s shareholder. Vennet R Vander (2002) shows that the acquiring and acquired banks exhibit an economically meaningful pre-M&A difference both in terms of cost and profit efficiency. The study finds however that the results are consistent with a partial profit efficiency enhancement, but not with

2006-2011

Market Share (as a ratio of total asets)

Source: Albanian Association of Banks

This article is an excerpt from the paper: “Banking in Albania and its way toward the future”, prepared by Dr. Elvin Meka and Arjan Kadareja PhD, presented at the International Scientific Conference: “Corporate Albania – The Past, the Present and the Future”, EUT-UET,

www.aab.al • BANKIERI • 9

any tangible gains in terms of cost efficiency. Soussa F (2004) shows that bank FDI can be explained by factors such as regulatory opportunity, distance and socio-cultural interlinkages, low information costs, strong trade links and geographic proximity. Liao and Williams (2006) find evidence which does not support suggestions of a transfer of wealth from shareholders in emerging markets to their counterparts in industrialized markets. In Albania, the M&A process is dominated by cross-border acquisitions, which exploits principally internal capital market (cheap loans from parent) and to some extent economies of scale and scope (good business practices and techniques from parent). It may be stressed that now it is the turn of (internal) M&As, in order to fully operate on a national scale and so to exploit economies of

The internal M&A process through the increase in the banks’ portfolios will create more room for risk taking. This could increase the credit exspansion. 25

scale (see Figure 1) and have room for more risk in the investment portfolio. In the frame of the supporting argument, Figure 2 presents the GDP share, the ratio of sectorial credit to total credit outstanding and non-performing loans to total sectorial credit for three important sectors of albanian economy, namely agriculture, construction and processing industry. So, although the agriculture, in GDP terms, almost equals the sum of two others, in terms of credit share it represents only one tenth of the construction credit or one seventh of the industry credit. The reason is shown by the middle bars, where the share of non-performing loans to total sectorial credit in agriculture clearly

Credit, NPLs and GDP share in 2010

0 Credit / Total credit outstanding

NPL / Credit outstanding

Agriculture, hunting and forestry

Construction

Source:Bank of Albania and authors’own calculations.

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GDP share Processing Industry

dominates the other two sectors. We think that the internal M&A process through the increase in the bank portfolios will create more room for risk taking. This could increase the credit exspansion. However, M&A cannot be a substitute for the much needed structural market reforms such as those linked with property rights, collateral execution, creditor legal rights, etc. One might, rightfully so, raise the issue of a lower competition arising in a post M&A system with smaller number of bigger banks. This is a legitimate point. However, a big number of banks do not necessarily mean higher competition or the other way around a lower competition is not necessarily associated with a lower number of banks. To close, it could be concluded that, after the first decade of its life, the Albanian banking system managed to escape a big global crisis and to reach respectable levels of assets, deposits and loans, thus giving a thrust to the economic development in Albania. However, should it be positively considered, the process of mergers & acquisitions M&A is likely to bring important benefits for the Albanian banking system and the economy, in terms of effectiveness, diversification and credit expansion.

FRONTLINE

HISTORIC DROP OF INTEREST RATES: OK but... Banks’ (lending) strategies are not basically appealing to businesses, as their final interest is to obtain financing for their projects, whereas banks are willing to lend, but with conditions that are not directly related with above factors. by Ard KOLA

he relationship between banks and the rest of private entrepreneurship has entered into spiral that requires attention. Although divided by their viewpoints both camps, if they could be qualified in such a way, have basically the same goal: profit. Bank of Albania is making its homework, to the best possible it can. Typically, it lowered the base interest rate for the sixth time, which stands now at 3.75 %, from 5.25 % in September 2011. Of course, BOA could have still more ammunition to fire, at least in terms of flexibility of organization of banking affairs, keeping in mind lengthy discussions to change the Codes (Civil Code and Civil Procedure Code), which got the approval by the Council of Ministers, after more than a year of energetic discussions. However, better late than never! Expectations stand high about the positive results of legal amendments. The first quarter of 2013, scored two substantial events in the banking market. Firstly, the base interest rate (for LEK) dropped further and secondly, the government approved the amendments to the Codes. But could they be clear enough to energize credit to economy? Banks’ and business’ representatives discussed between them for more than 4 long hours about credit problems. Arrows were thrown from both sides, although both sides expressed essentially the same thing, but in different terms and language. Lending appears to be not a prob-

lem for banks, as they are sitting on a mountain of money, deposited with them. The question here is made on whether it should be extended in euro or in Lek, but what counts is that the financial system is stable. On the other hand, businesses need credit and financing and are willing to invest. So far it seems that the parties agree up to this point. But where is the dividing point between banks and businesses? By the end of December 2013, total credit reached ALL 577.8 billion, with an annual growth of 2 %, where credit to business increased by 2.6 %. Today banks are criticized for tightening financ-

Banks are reaching the $ 10 billion mark in deposits and have expressed their interest in granting loans for efficient projects, based upon healthy and steady business plans. This is just one side of the story, as the business must initially payback its debts in arrears to banks (problem loans jumped above 22.5% of total loans).

ing conditions, as they did 5 - 6 years ago, when lending was easier and scored 50 - 60% annual growth rate. Theoretically, reduced rates should give effect to reduced transaction costs, and in fact banks have reflected it, but the reaction is chiefly expected to be materialized at loans. Following banks’ transmission history of BoA’ interest rate movements, it should be noted that such reflections have been slow, typically after 6 - 7 months. Despite the central bank’s stimulus, the Treasury Bills market seems to rule the “game”, whose yields (12-month Treasury Bills) are used as benchmarks by banks to determine loan interest rates. Fortunately, 1-year T-Bills yields decreased from 7.37 % in June 2012 (when the base rate was 4.25 %) to 6.3 % (when the rate dropped to 4 %) in December 2012. In January 2013 the T-Bills yields rose naturally, due to government’s need for money, however, the prevailing trend is downward, given that in January 2013 the base rate dropped down to 3.75 %. However, these are banks’ strategies which are not basically appealing to businesses, as their final interest is to obtain financing for their projects, whereas banks are willing to lend, but with conditions that are not directly related to above factors. Thus, both parties should help each other to achieve the common goal, thus making the year 2013 a different one from the others.

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INTERVIEW

15 ALBANIAN YEARS OF ALPHA BANK We will continue to consolidate our market position, enhancing all business activities and accommodating all customer segments with tailored products, but also with mass solutions

Mr. Periklis DROUGKAS General Manager, Alpha Bank Albania BANKIERI: ALPHA BANK HAS JUST CELEBRATED ITS FIFTEENTH ANNIVERSARY IN ALBANIA. HOW WOULD YOU SUMMARIZE THIS EXPERIENCE IN A COUPLE OF WORDS? As you know Alpha Bank started to operate in Albania in January 1998, as a branch of Alpha Bank A.E. The Alpha Bank Group is one of the largest banking groups in Greece, which was established as early as 1879. In addition to Greece, the bank has presence in the South-Eastern European Countries, UK, and Cyprus. We are happy to celebrate 15 years in Albania, already as a subsidiary and not as a branch. Through all these years, we had the pleasure to contribute to the country’s growth, by financing not only key Albanian companies, but also some of the biggest infrastructure projects, such as: “Rruga e Arbrit”, Tirana International Airport, Telecommunication Industry etc. Also, Alpha Bank was the first local bank arranging the biggest syndicated loan to the Albanian Government, aiming at completing projects in the way of country development and EU integration. During this period, we grew together with our customers, and I am proud to say that we are currently in the position to fulfill their needs and meet their expectations, with a number of different products and services. I cannot say that the road towards accomplishment has been easy and we have witnessed many challenges, but we have managed to overcome them and to be in a position to serve the Albanian market, business community and individuals, alike. BANKIERI: AS ONE OF KEY PLAYERS WITHIN THE ALBANIAN BANKING INDUSTRY WHAT ARE KEY FEATURES THAT MAKE ALPHA BANK AS A RESPECTABLE AND UNIQUE BANK HERE? When talking about market positioning, Alpha Bank is traditionally perceived as a bank with a strong corporate identity, competitive and customer oriented. It is perceived as a bank capable of funding large projects, which have had a significant impact in the country’s economic growth. The business community here is supported in projects that

constitute priority, in terms of development such as: trade and services, production lines, tourism, etc. Transparency, reliability and responsibility are the principles that Alpha Bank Group has been following during the last 130 years. The bank is being guided by these values in its day-to-day operations, by building its reputation as a leader. Tradition and a highly educated staff, helped by international experience, have shown themselves to be a winning combination. In order to meet clients’ needs and offer them products that they really need and will use, a specialized team of Alpha Bank employees works on creating new products and improving the existing ones. We can mention here around 15 different deposit products, which offer to our individual clients profitable rates of return and flexibility to access their funds, as per their preference. The retail lending products offer competitive terms and conditions, such as favorable tenor and low monthly payments. The credit cards offered by Alpha Bank are under the trademarks of American Express and VISA and we provide our card members with a list of privileges and benefits. Summarizing the retail products, I can say that they are innovative and we offer to our clients much more than the above mentioned benefits. Practically, I can mention health coupon, jointly offered with our saving accounts, or free house interior design and insurance for mortgage clients, or many discounts benefit for our card members in our large merchants’ network. What differentiates us is a close consideration of customer needs and focus towards finding the right financial solution to these needs. We aim to continue to do so with high efficiency, creativity and within a reasonable timeframe. BANKIERI: HOW DO YOU DEEM THE FUTURE POSITION AND ROLE OF ALPHA BANK WITHIN THE ALBANIAN BANKING SYSTEM? In 17 May 2012, Alpha Bank Albania was transformed into a subsidiary of Alpha Bank A.E. with a share capital of more than EUR 78 million. This transformation has been a process in response to the increased public trust and as an action to prevent the negative impact of Eurozone crisis. Of course, we will continue to consolidate our market position, enhancing all business activities and accommodating all customer segments with tailored products, but also with mass solutions. Our infrastructure, human capital, capacities and achievement will are prevalent and will enable Alpha Bank to maintain its position among leading financial institutions in Albania. In this 15th year of our operations in Albania, we celebrate as part of the Albanian reality and helping this reality to be better for people in this country, that so much deserves an ever increasing quality and standards of living and working here.

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BANKING INTERVISTA SYSTEM

THE NEW SET OF BANKING LEGAL AND REGULATORY CHANGES, VERY INDISPENSABLE, but beyond the measures... he Albanian Association of Banks (AAB) discloses to the general public its official opinion and remarks, about T the latest measures and proposals related to the banks’ lending activity and the issues, raised recently within the Albanian banking industry.

Regulatory changes by Bank of Albania

Bank of Albania has introduced four regulatory changes to increase lending from banks that have been mostly welcomed by the banks, with some exceptions. Specifically, banks welcome the reduction (to zero) of risk coefficients applied to new loans, in case banks will increase lending within the range of 4% - 10%. This measure will enable banks to increase their lending activity without the need to inject additional capital. Also, banks welcome the regulatory changes which are supposed to facilitate and give a further spur to banks to restructure loans of good customers, but in temporary financial difficulties. Additionally, the reduction of liquidity minimum indicators will release more available funds to lending. AAB stresses that, in order to support fair competitiveness and reach the expected impact, this measure should be applied equally to all banks operating in Albania. On the other hand, the proposed measure to increase the risk coefficient (at 100%) for investments abroad is not expected to have any countable effect, if none, on lending growth. Such investments are already a non-profitable activity (if not a loss-making activity). Banks are constrained to place liquidity abroad, because of the lack of local loan demand in foreign currency, while banks intend to replace the abroad investments with sound lending facilities.

Changes to Civil Procedure Code

The proposed changes by AAB, in close collaboration and with the support of international organizations, such as: World Bank

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and EU project EURALIUS and recently approved by the Parliament, aim to address some of the most important issues that hinder the process of collateral execution, and therefore the entire process of lending to economy. The proposed amendments by banks aimed to establish the worldwide standard of law on which the banking business and practice rely, which is the efficient foreclosure of executive titles, by reducing the possibility to use extraordinary means, such as: suspension of execution as a usual measure. These proposals aimed at the creation and encouragement of lending activity, creating certainty for all parties in the market and more security for the investing public (deposits holders).

The issue of writing-off bad loans

Bad loan write-offs should be understand as an accounting process that banks undertake, in accordance with international standards, as well

AAB emphasizes that banks in Albania are committed to lending to the economy as their prior and organic activity, and for that they necessitate good financing projects from the domestic businesses, and a sound, stable and applicable regulatory framework.

as in line with Bank of Albania’s regulations. These bad loans are provisioned, for risk purposes, in the banks’ books at 100% and writing them off the books is merely an accounting procedure with no effects in the income of banks, and especially on debtors’ obligation towards the bank. The discord so far stands at the misinterpretation by Tax Authorities of the criteria stipulated by the law about the recognition of bad loans i.e. the exhaustion of all legal means for collateral execution. The wrong practice does not consider important facts such as: full provision of bad loans by banks (unlike other types of creditors), exhaustive legal procedures, banks follow for their collection, such as the release of Court execution order and following up the process with the bailiff’s procedures. In this view, the recognition of bad loans may be extended for years, thus affecting the quality of banks portfolio and their available liquidity for lending. Banks are not endeavoring, nor proposing, any massive, unregulated write-off for their bad loans, rather they are seeking a long-term solution through regulatory changes that do not leave room for speculations and misinterpretation of relevant particularity of bank loan contracts. AAB emphasizes that banks in Albania are committed to lending to the economy as their prior and organic activity, and for that they necessitate good financing projects from the domestic businesses, and a sound, stable and applicable regulatory framework. Certainly, this new set of banking legal and regulatory changes is very indispensable, but beyond them commences the complex daily reality to encourage credit to economy…not entirely from banks, only!

BANKING INTERVISTA SYSTEM

FOREIGN ACCOUNT TAX COMPLIANCE ACT (FATCA) AND ALBANIA

Albanian authorities have no official recognition on FATCA and there are no discussions in place for any intergovernmental agreement with IRS, yet, and this situation sets local banks free of obligation to be FATCA-compliant

by Rozeta KOKALARI Head of Compliance & AML Compliance & AML Raiffeisen Bank Albania

he Foreign Account Tax Compliance Act (FATCA) is an important development in the U.S. efforts to improve tax compliance, involving foreign financial assets and offshore accounts of US citizens, thus avoiding tax evasion. In addition, FATCA requires foreign financial institutions, FFI (will be considered all non-US financial institutions) to report directly to IRS (the US tax authority) information about financial accounts, held by U.S. taxpayers, or held by foreign entities in which U.S. taxpayers hold a substantial ownership interest. The aim of FATCA is to track down US taxable incomes, report and – in case it is applicable – withhold 30% tax on such incomes. It is for that reason that U.S. Department of Treasury announced its initiative with more than 50 countries and jurisdictions around the world to implement FATCA. Intergovernmental

agreements which ensure FATCA compliance are signed, during 2012, between IRS and UK, Germany, France, Spain, Italy, Switzerland, Japan,. Other EU countries like: Austria, Poland, Czech Republic, Hungary, Russia, Bulgaria, Romania and Slovenia have started discussions for intergovernmental agreements with IRS. According to FATCA, FFIs are required to sign a disclosure agree-

The situation is more complex for local banks with head offices based in EU countries, which are FATCA-committed. Such banks are presumed to be FATCA-compliant, but there are local legal gaps, that make it difficult to fulfill FATCA requirements.

ment with IRS. Should a FFI refuse to sign the agreement, the FFI (and its clients) will be subject to a 30% withholding tax on all interest, dividends and sales proceeds from US source investment income. In addition, all financial institutions which operate in Albania, whose mother companies are located in FATCA-committed EU countries, will be required to be FATCA compliant, as well. The agreement shall require FFIs to identify US clients and to report them to IRS, on an annual basis. This means that FFIs are required to:

 Establish/develop

all necessary processes which enable them to carry out customer identification/ classification regime, required by IRS;

 Ensure

proper storage and search of relevant data;

 Carry

out the required customer screenings;

 Prepare for reporting and withholding taxes.

Constraints for FATCA implementation in Albania Albanian authorities have no official

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recognition on FATCA and there are no discussions in place for any intergovernmental agreement with IRS, yet. This situation sets local banks free of obligation to be FATCA-compliant. The situation is more complex for local banks with head offices based in EU countries, which are FATCA-committed. Such banks are presumed to be FATCA-compliant, but there are local legal gaps, that make it difficult to fulfill FATCA requirements. More specifically: Client identification of US clients, by indication of US status (starting by 01.07.2013 but redefined by IRS on 01.01.2014). This process includes both US client’s identification and their classification as US customers with specific status which might be relevant to be reported and/or to be subject of withholding. According to current legislation, internal bank procedures require them to gather and hold a copy of a valid identification document (ID, passport, etc.) So, should such documents lead to any particular for an US citizenship, this must be evidences and kept by banks.

 As

for client’s classification of US citizens, there is no local legal base for banks to require clients to provide additional FATCA information, via particular documentary forms, where clients must specify their status as US citizens, as long as there is no signed intergovernmental agreement and domestic law to foresee that. The Law “On Personal Data Protection” foresees the explicit obligation: “not collect customer data that go beyond bank daily activity”.

 Annual

Reporting process about identified U.S. clients ((starting by 30.09.2014 but redefined by IRS on 31.03.2015). With regard to reporting and bank secrecy there are clear restrictions on reporting this category of clients without their written consent.

 Withholding

is the process to deduct 30% on all interest, dividends and sales proceed from U.S. source investment income of clients/partners which refuse disclosure) Withholding (starting 1.1.2014 redefined

The Commissioner for the Protection of Personal Data on FATCA: According to Article 29, para.1 of Law No. 9887, dated 10.3.2008 “On the Protection of Personal Data”, The Commissioner for the Protection of Personal Data is the independent authority, responsible , in accordance with the law, for supervising and monitoring the protection of personal data, by respecting and guaranteeing human rights and fundamental freedoms. In case of FATCA, we are dealing with the international transfer of personal data of banks’ customers in Albania, toward US. Banks that conduct their activity in Albania are bound to process personal data in compliance with national legislation on the protection of personal data (the above–mentioned law, the Decision No. 3, dt.20.11.2012 “On establishing states, with sufficient level of protection of personal data”, and Instruction No. 1, dated 19.02.2010: “On allowing certain categories of international transfers of personal data to a state where there is not a sufficient level of protection of personal data “). One way of handling international transfers of personal data is through consent given by data subjects. If this is not achievable, then the transfer can be accomplished by way of signing a cooperation agreement between Albania and the US (as it is done with other European countries), based upon Article 8, para.2, letter a) of the Law “On protection of Personal Data”. Other options for the international transfer of personal data without the consent of the data subject, are prescribed by Article 8, para.2, letters c), d), e), e) of the above law. If full compliance is reached in one of the above cases therefore the international transfer of personal data is valid and legal.

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by IRS for 31.12.2014). Under the Albanian legislation this cannot be executed without the client’s written order. The only retention commercial banks may apply is “the withholding tax”. It is applied in favor of the Albanian Tax Authority on the incomes that a client generates out of business relationship with the bank. Summing up, commercial banks operating in Albania, with head offices based in the EU countries are faced with a big dilemma, how to overpass legal loopholes and be compliant with their mother banks’ policies.

Bank of Albania on FATCA’s requirements: Regarding the decision on FATCA requirements, it should be noted that banks operating in Albania have an exclusive responsibility to prepare detailed analysis (according to Law no. 9887, dated 10.03.2008 “On Protection of Personal Data”, Article 6 , para.1 /a, and Article 8, para.1), in terms of legal compliance related to information privacy and confidentiality, as well as on penalties, applicable in case of non-implementation of the agreement, the risk of money laundering, etc. In this regard, banks which will implement the agreement with US Government, with the scope of identifying taxpayers who hold accounts outside the US should: • Get the client’s consent, in the form of written authorization; • Ensure that personal data processor is a member of the program “Safe Harbor” In any case, international data transfers will be subject to relevant procedures, set out in the legislation for the protection of personal data. The compliance with the above requirements, avoids any legal obstacles to the signing of the agreement between commercial banks and IRS (U.S. tax authority). It should be noted that, banks must make detailed assessments on potential risks that may arise from the implementation of this agreement, including here a due diligence process with specific data from banks, aiming at analyzing costs and benefits, arising from this agreement. Should this agreement be effectively signed, the compliance of the above-mentioned legal requirements may be subject to verification during on-site inspections.

BANKING SYSTEM

ALBANIA AND BASEL II: HOW FAR DO WE STAND? Bank of Albania aims at adapting with standard methods of credit and market risk, as well as the basic indicator approach and advanced measurement approach for calculating the requirements for operational risk capital, in order for banks to address better their needs for capital, chiefly to monitor these risks

by Ermira CURRI, MBA Head of Regulations’ Office Supervision Department, BANK OF ALBANIA

ince the creation of the Basel Committee in 1974, following many serious concerns related to foreign currency markets and established banking markets, such as: the collapse of Bankhaus Herstatt in Germany, prompted the introduction of a set of international standards for banking supervision and activity. Basel Accord for capital, is one of those set of standards, which are recognized and applied by Albania, in relation to capital standards and its evaluation. This agreement was officially announced in July 1988 and is known as the Capital Accord of 1988. The agreement, suggested a minimum capital requirement of 8 per cent, in the frame of credit risk assessment (currently Albania applies a minimum Capital Adequacy Ratio of 12 per cent) – effective form end-year 1992. Since the announcement of the Accord, banks’ capital adequacy ratio was generally increased, or better say rose significantly. Notwithstanding some changes in the Accord, the fact is that it did not hindered the development of the banking market and is seen as paret of important financial devel-

opments which affected the banking activity, but the latter began to present, consistently, a different risk profile from what was prescribed by his Accord. Thus, while the financial activities were converging, the traditional boundaries between banking, securities, and insurance activities were increasing blurred. Also, the financial sector’s consolidation, dictated by increased customer demand for integrated financial services and an increasing shareholder pressure to increase yields was ecoming increasingly evident through mergers and acquisitions, strategic alliances and

The project is seen as an opportunity for banks to further improve their risk management systems and calculations for calibrating their (economic) capital needs, also, it provides a rational connection of bank’s capital with its risk profile.

joint capital investments in financial institutions, throughout the world. This accord addresed the credit risk only, which is not any more the only significant risk faced by banks. Besides such risk, banks were faced in their day-to-day activity with a variety of risks, like: market risk, interest rate risk, liquidity risk, operational risk, legal risk, reputation risk, strategic risk, and moreover banks may face unforeseen risks, too. These and other subsequent developments shaped the need for reviewing and adapting banking supervision rules and methodologies, aiming at helping the banking system and also to acomplish its strategic objectives, to ensure the financial stability. Specifically, the Basel Committee published initially in June 20041 the new set of rules, called the New Basel Capital Accord, otherwise known as Basel II. It is well-known that Basel II consists of three pillars: (i) requirements for credit, market and operational risks, (ii) supervisory review process and (iii) market discipline. While the first pillar addresses, firstly, the supervision authority’s requirements for operational risk, it is the second pillar which prescribes that each bank should have robust internal processes, to measure its capital adequacy based on a full assessment of risks the banks was exposed to, as well as the third pillar, which aims to encourage market dis-

The first ideas for Basel II were initially discussed by Basel Committee since 1999.

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In the frame of launching Capital Requirements Directive IV, Bank of Albania will adapt the requirements for supervisory (regulatory) capital with the supervisory framework that focuses on this important element of capital adequacy ratio, as well as the inclusion of some other elements, related to monitoring the liquidity risk. cipline, through conteplating a set of reporting and disclosure requirements to banks, in order to inform the general public adequately aobut the risks to which banks are exposed, their risk assessment process, as well as other information related to capital adequacy or its components.

Albania and its approach to Basel II. What about Basel III?

The “Roadmap” of Albania (i.e. Bank of Albania’s one), is a gradual approach towards compliance with Basel II and European directives for the credit institutions activity and their capital adequacy, as an approach chosen by the supervisory authority, which considers the stage of development and needs of the Albanian banking system. This approach will initially commence with the adoption of standard2 methods of risk measuring, monitoring and assessment, followed by implementation of internal models and advanced risk measuring, assessment and monitoring, in the mid-term. Bank of Albania has recently (February 2013) launched for discussion with the banking industry, a new draft regulation: “On capital adequacy ratio”, as a complete

review of the existing regulation, in the light of Basel II. This project aims at adapting with standard methods of credit and market risk, as well as the basic indicator approach and advanced measurement approach for calculating the requirements for operational risk capital, in order for banks to address better their needs for capital, chiefly to monitor these risks and, in each case, being compliant with the required levels of this ratio (12 per cent). Assisted by Bank of Italy, in the frame of a two-year twinning program, the project creates the opportunity for a pretty much similar approach of our regulatory and supervisory framework, with the Acquis Communautaire3. Additionally, the actual period when the project is launched, is deemed as appropriate, because the standard (capital accord) has passed the test in countries and banks which are active in the international markets and for whom its was practically designed, thus creating a full picture with all practical positive and negative efects. The project is seen as an opportunity for banks to further improve their risk management systems and calculations for calibrating their (economic) capital needs. The Basel II approach of this project provides a rational connection of bank’s capital with its risk profile; more specifically it addresses the supervisory authority’s requirements and regulations, mainly related to:  standard method of calculating capital requirement for credit risk and counterparty risk;  introducing the concept of the External Credit Assessment Institution (ECAI) and the Export Credit Agency (ECA) and the use of their assessments according to respective exposure classes;  introduction of a number of extended exposure classes and the principles and rules for calculating risk-weighted exposures for each exposure class;  principles and methods of recognition of credit risk mitigation techniques;  securitization and calculating the exposure value for securitizations - minimum requirements for rec-

ognition of significant credit risk transfer and calculation of riskweighted exposure amounts and expected loss amounts for securitized exposures;  basic indicator approach and advanced measurement approach for calculating the requirements for operational risk capital (not previously addressed by authority’s requirements);  standard method of calculating the capital requirement for market risk;  supervisory authority’s requirements for the internal assessment process of capital adequacy, based upon risk management strategies;  disclosure requirements relating to publishing bank information about capital adequacy to ensure compliance with market discipline requirements. In addition, the project will be preceded by a parallel discussion with ad-hoc group already created by AAB, in order to share experiences with large banks which have their parent in EU countries and also with small banks, as regards costs arising from this process. Currently, the lessons drawn from the 2008 crisis highlighted the need for a possible Basel II revision, today known as Basel III (or Capital Requirements Directive IV) in terms of a revised framework, which consists mainly on capital requirements reviews for purposes of monitoring liquidity risk, the prudent requirements for recognition of components of supervisory (regulatory) capital, etc. In the frame of launching Capital Requirements Directive IV, Bank of Albania will adapt the requirements for supervisory (regulatory) capital with the supervisory framework that focuses on this important element of capital adequacy ratio, as well as the inclusion of some other elements, related to monitoring the liquidity risk.

Basel II allows rooms for adaptions, ranging from simplest to thëmost advanced ones, thus offering opportunities, like the case of the Albanian banking system, for gradual approach (adaptation), starting from simple methods, as far as full compliance with it (including the advanced methods and other elements) is not binding, like EU member countries. 3 Since the launch of Basel II and European Directives, Bank of Albania has implemented, from time to time, some partial adaptions, which are embodied in the banking act and the supervisory regulatory framework, mainly consisting in credit risk management, minimum disclosure requirements, prudential bank management, supervisory review process, etc.

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EXPERTS’ FORUM

NEW CHANGES AND AMENDMENTS AT CIVIL PROCEDURE CODE – OPPORTUNITIES FOR MORE EFFICIENT FORECLOSURES Amendments in Civil Procedure Code, recently endorsed by the Albanian Parliament aim at shortening and simplifying the collateral enforcement procedures, for a more effective implementation and easing all procedures, carried out by citizens by Ejvis NDONI Team Leader, Bad Loan Execution Unit Legal Department Raiffeisen Bank Albania

he commencement of private bailiff services in Albania kickstarted “a new era” in the collateral enforcement of problem loans in Albania. Private bailiffs increased the quality of such service notably, by becoming quite proactive in the foreclosure process. Such a change in quality revealed that, along with the necessity for an independent and impartial court system, a need for several improvements in Civil Procedure Code articles, linked with the foreclosure process of banks’ executive titles, were more than evident and welcomed. Why banks are treated differently from other lenders? Because the bank, while a private company, manages and relies on savings from general public, in the course of their activity, and this is the very reason why bank loans, and their performance are practically differentiated (since 2007 with an ordinance of the Constitutional Court), thus being considered “a substantial public interest”. In the light of this viewpoint, banks in close cooperation with EURALIUS project and Ministry of Justice, and further to a continuous discussion within AAB Legal Committee, requested and proposed some amendments to Civil Procedure Code. All discussions and proposals were toggled together in January 2013 in the final draft law: “On some changes and amendments

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Key amendments aim at abolishing the court’s right to intervene in the enforcement mechanism of foreclosing an executive title, such as the bank loan, for which an executive order has been already issued. to the Law No.8116, dated 29.3.1996 “Civil Procedure Code of the Republic of Albania”, as changed hereafter”, currently endorsed by the Albanian Parliament. The new legal package intended, inter alia, to ensure some improvements in terms of recording court sessions with the “audio recording” method. Audio recording in courts enables the recording of all verbal communication during court sessions and ensures subsequent rehearing of the session, should it deemed necessary. Such a system does increase the transparency and improves the court process administration (procedural

acts, notifications and deadlines). In this regard, and further to the international practice on notifications in court processes, now the legal includes also new ways of electronic communications, such as: electronic addresses, phone calls, or through a SMS message. However, the most important part for banks are the changes in the following articles of the law, which are directly linked with the foreclosure of banks’ executive titles, as follows: • The changes and amendments in the new legal package aim at raising the collateral enforcement’s effectiveness, i.e. accelerating the process, as the key procedural mechanism for foreclosing problem loans. Specifically, according to Article 206, point “b”, the court may suspend the enforcement through a preventing measure, ordered in a lawsuit, as follows: “The proposed changes in Articles 205/1 and 206, point “b”, are intended to reduce the court’s opportunity to take measures which contradict bailiffs’ actions, as follows: “through other measures taken by the court, except contradicting bailiffs’ actions, against whom no one can take measures towards ensuring the lawsuit”,etc.” • The changes in Article 517 of Civil Procedure Code consist in

the right to loan restructuring, by way of stripping such right from the courts, in case of bank loans. Such a measure, approved according to AAB proposal, is thought to have a significant impact in the restructuring process, by providing banks with valuable assistance in this regard. • The requested changes on improving and clarifying the Article 577 of the Civil Procedure Code were related to the percentage decrease in value of the object in the second auction. This is so, because the practice has shown that bailiffs do interpret this article in different ways. Some of them lowers the price in the second auction with an additional 20 per cent from the value of the first auction, so the price in the second auction turns out to be 64 per cent lower than its initial price, whereas another interpretation notices that, the object’s value may be lowered up to 80 per cent of its initial price. AAB proposals included also a proposal to decrease the value of the initial price, set in the first auction, by 50 per cent, by establishing an accepted average for debtor and creditor, thus making

•

clearer the object’s value (price), as a starting price for the second auction. However, the proposal was not considered, but the lawmaker has changed the percentage level, by which the price can be lowered (from 20% to 30%), Another important change proposed at Article 609, aimed at non-suspending the enforcement of the executive title by complaining against actions or refusals from the bailiffs, by striping from the courts, the right to act otherwise. The lawmaker endorsed an intermediate solution, hereby imposing a suspension upon a guarantee, but now such a suspension has a maximum expiry deadline. The proposed change in Article 568 of CPC, is approved as proposed by banks (AAB), aiming at an increased transparency during auction process, – which is fully in line with AAB objective to establish the online auctions’ portal. The Article 610 of CPC allows complaints against bailiff’s procedure, despite the AAB request of stripping such right, but such complaints could not last more than 20 days. this regard, and considering on

one hand, the continuous growth of non-performing loans and the necessity to increase bank credit to economy, such changes are deemed as crucial as an urgent economic need, within the Albanian banking system.

The actual practice, as well as the market dynamics show, that the starting price of the second auction is too high to ensure he sale of property, especially when considering that the fair market pricesetting is difficult under current conditions. Therefore, auctions are often unsuccessful because of such unrealistic price with which the second auction is opened.

The approved changes and amendments to Civil Procedure Code by the Albanian Parliament date of the new price is set.” The Parliament of the Republic of Albania has recently endorsed the proposed package of changes and amendments 4. In Article 609 the following changes are made: to Civil Procedure Code (CPC), where the majority of the a) The third paragraph is amended as follows: “In these banking industry’s proposals were considered, as follows: cases, the court may order suspension of the decision with or 1. In Article 517, the third paragraph is amended as folwithout guarantee. When the executive title is an act of bank lows: “At the request of debtor the court of first instance may, loan, or lending act by nonbank financial institutions, the court in exceptional cases andconsidering the debtor’s financial situmay suspend the execution, against a guarantee and only for ation or other circumstances of the case and after hearing the a period not exceeding three months, unless the court, during creditor, may postpone the execution deadline of cash obligation, or divide such obligation in installments, unless such obthis time, decides by final decision t to accept the lawsuit. The ligation arises from an act related to bank loan. The decision measure of suspension for decision’s execution is considered as is taken in a court session, within 20 days from the date of annulled, upon expiration of the three-month period, or when request and can such decision may be contradicted by a special the court, within that time span, decides to refuse the lawsuit appeal.” or to close the case”. 2. In Article 568, the following words are added at the end 5. At the end of Article 610 the following two paragraphs of the first sentence of the first paragraph: “as well as for are added: “The appeal against bailiff’sactions or refusal does 5 days in a row, in two national newspapers with the largest not suspend the execution process, unless the court decides circulation.” 3. In Article 577, the first paragraph is amended as follows: otherwise. When the executive title is an act of bank loan or a “If no bid is submitted in the first auction, then the bailiff sets, lending act by a nonbank financial institutions and the court within 10 days from the end of the first auction, a new price has suspended the decision’s execution, thus the suspension for the object, not less than 30 percent of the initial price, set is considered annulled after 20 days of issuing the decision of in the first auction. The second auction for the object’s sale is suspension. The courtdecision of the may be contradicted by a conducted according to the rules prescribed by Article 568 of special appeal.” this Code and is carried out 30 days after the day following the

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EXPERTS’ FORUM

NEW TRENDS OF CENTRAL BANKING MODERNIZATION OR CHALLENGE? Accomplishing objectives of the future requires effective policies and good choices, where the human factor plays a key role, regardless of what the statute says

by Ela GOLEMI1 Member of the Supervisory Council BANK OF ALBANIA

he economic and financial crisis T has led some central banks, that in addition to their main objective,

that is, the inflation dynamics, to take care simultaneously for the economic growth. Replacing traditional policy of a single objective, actually implemented by most of the central banks, which aims to maintain price stability, the new “two-pillar” approach, has stirred up some debates and academic concerns, regarding the design of a realistic and modern central banking. The latest move of the Argentinean Central Bank has fed even more this debate. The new law of the Central Bank of Argentina, adopted in March 2012, goes beyond the “twopillar” approach and paves the way for a multi-objectives effort. It turns a new page for the debate regarding the implication of new extended approach to the cost of macroeconomic stability, as well as that the new style of monetary policy does really work. Moreover, in Europe and the US, the “heavy artillery” Bernanke and Draghi prefer to keep low interest rates for a few years more and aggressively buy debt financial instruments.

Some prominent economists have hailed either the Argentinean movement towards multi-objectives approach of the central bank, or Bernanke’s and Draghi’s movements. At a time when governments are powerless to manage the production and develop labor markets, there is a notion, recently supported and aired by media, that central banks can ensure price stability and restore necessary conditions for economic growth, or

The statute of a central bank cannot point out when the monetary policy stimulus should take place, neither how this policy can be coordinated with the fiscal stimulus, nor how to conduct the monetary policy, when the interest rates are close to zero and public debt rate is high.

accomplish other fiscal objectives. This case explicitly shows that some economists are transformed in paranoiacs of laws and regulations - fiscal policy easing in the past and the actual monetary policy easing can solve the problems across the entire spectrum of economics. While the crucial role of “human factor”, or the intelligent choice, is significantly being neglected in today’s complex macroeconomic models, the attempts to resolve the difficult unemployment crisis and strains to manage public debt, represents a signal of serious difficulties, in itself. In the modern context of global macroeconomic challenges, a prudential management is necessary because the complex reality requires wise choices, accurate and appropriate measures by the central bankers, as well as executives that go beyond the simple monetary and fiscal policy. Reflecting over the “orthodox economy”, which openly blames “rules” and detracts the attention from the people is quite necessary. It is now common, that in time of crisis and financial turmoil the blame is placed on rules, and not on people. We face multidimensional economic issues, and it is not fair to attribute current economic difficulties to the central bank’s set of rules and legal framework, or tight fiscal measures. Also, we must be aware that modern economies cannot increase debt burden indefinitely, nor undermine the scheme of debt management.

The opinions expressed here are those of the author and does not represent the official opinion of the Bank of Albania.

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Considering today’s problems from a simple mechanism point of view, that a good central bank’s law, or dynamic fiscal policy, can always lead to successful achievements, is wrong. The complexity of today’s economy requires not only the use of effective instruments, which are deemed of a paramount importance, but also the consideration of two other elements, that have received a relatively little attention: (1)The judgment according to the past does not help in the framework of the global economy and financial development. For example, Great Britain had a public debt much higher in the past than today. After the World War II, a period known as the time of glory in terms of power, its debt reached 250% of GDP. However, the management of sovereign debt has changed significantly; what was normal or sustainable debt in the past is abnormal in our days; (1)the “human” factor, which in fact is crucial nowadays. It can happen that good laws of the central bank or fiscal freedom can be badly managed and/or coordinated. There is no law or any statute which could automatically present the good actions, or transform a weak monetary and fiscal policy, or their lack of coordination, into something effective for the economies. In the case of a complete neglecting of important role of “smart decision”, let’s just remember what might have happened with the “fiscal cliff” in the US, which represented the automatic cuts in spending and tax in-

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creases, over a decade. Should this wouldn’t be avoided by a wise intervention, it could lead USA back into recession, when more than US$ 500 billion would go out of its economic system. Then, what meaning would have empowering central banks with a wide range of objectives, if they cannot manage money cleverly and forecast any economic and financial turmoil? The controversial part of current debate is how can we believe that the central bank is always able to perform, according to Argentine mandate, an “equal distribution” and “sectoral distribution of the loan”, despite its capacity to focus exclusively on the problems, to understand the complex and dynamic realities and to act consistently and systematically? How can be imagined that a multi-objectives law could enable the realization of a rational policy and/or guide central bankers to target a nominal GDP level, as Ben Bernanke wanted to present, but did not present it? It is not believable that Mr. Bernanke’s argument to help manage public debt through a monthly purchase of US$ 40 billion financial instruments in the market is in itself a signal that the central bank can stimulate the economy and create jobs, at any time it wants. If the new central bank’s law, as that adopted in Argentina, mechanically sets a countercyclical monetary policy, provides a wide range of objectives and an effective coordination with fiscal policy, choses and sets priorities and predicts future actions, then an extra sentence in the statute of any central bank would be enough to achieve all possible targets. The statute of a central bank cannot point

In the modern context of global macroeconomic challenges, a prudential management is necessary because the complex reality requires wise choices, accurate and appropriate measures by the central bankers, as well as executives that go beyond the simple monetary and fiscal policy. out when the monetary policy stimulus should take place, neither how this policy can be coordinated with the fiscal stimulus, nor how to conduct the monetary policy, when the interest rates are close to zero and public debt rate is high. The last hypothesis is of great importance, especially when we identify central banks which cut out interest rates close to zero, in an effort to stimulate the economy, while fiscal deficits and public debt grow with disturbing rates. The paradox here is that econometric exercises show that fiscal stimulus multiplier increases if the very low interest rates lose their role to influence the expectations of economic agents, so monetary policy becomes a useless tool. Moreover, it does not reflect how these instruments facilitate economy and how important they are to maintain price stability. Policies and strategies targeting the economic growth should not be limited only to establish a desired objective in the law. Accomplishing objectives of the future requires effective policies and good choices, where the human factor plays a key role, regardless of what the statute says. Everything we need to support the macroeconomic stability is a coherent and harmonized monetary with fiscal policy, but above all smart managers for money and public finances.

ECONOMIST CORNER

THE CYPRIOT FINANCIAL CRISIS – BANKS UNDER THE PINCH OF DEPOSITS’ TAXATION The need to find necessary money so quickly, by avoiding long-term and complex fiscal adjustments, along with the “aim” to engage foreign investors, particularly Russians, to make a “forced contribution” to the “Cypriot tax heaven”, constrained EU to make a taboo-breaking proposal, which “crossed the Rubicon” by Prof.Dr. Adrian CIVICI President & Head of Doctoral School European University of Tirana, EUT - UET

yprus, one of the tiniest countries in the EU often described as the “Switzerland of the Mediterranean”, appeared during the first months of 2013 as the next big patient of Eurozone. The financial situation of the island is full of ambiguity and disturbing questions. With a population of just over 1 million and an economy that represents only 0.2% of Eurozone’s GDP, it seems to have turned into “the biggest headache” for European leaders and especially for Eurogroup. It is the sixth country in a row which is shaking the foundations and the future of the European project itself and the euro, following Ireland, Spain, Portugal, Italy and Greece. Furthermore, under the pressure from other crises on the horizon for Slovenia, and perhaps Malta and Luxembourg, Cyprus emerged as an even more complicated case, considering the fact that almost all country’s banks were in the pot. The Cypriot particularity in the case of banks has to do with the fact that another country outside EU and Eurozone, Russia, was practically involved with these banks. In such cases, some extreme scenarios are played in the set, which

depict a totally bankrupt Cyprus and outside the Eurozone, although European top leaders are cautious when discussing the possibility of an uncontrolled bankruptcy of the island and a possible exit from the Euro, because just like the Greek case, this would have serious consequences for the entire Eurozone. Even in this case, a “rescue plan” was put over the table, which would be effective from end of May 2013. It seems that time is the worst ally in the Cypriot crisis. Mr. Mario Draghi, ECB Governor, has steadily sounded the alarm bells right against tendencies for “hesitating wait and see” positions, in relation to making a quick final decision about “resolv-

By imposing a tax on bank deposits above the EUR 100,000 guaranteed level, EU has built enough doubts to European depositors. Such precedent could turn into a negative element, with regard to political credibility of European leaders.

ing the Cypriot crisis”. Should the required external financial assistance is not guaranteed in the coming months the country risks the financial bankruptcy, by being quite insolvent in honoring its obligations’ repayments. Initially, the island’s needs to overcome this condition were at EUR 17 billion: EUR 7.5 billion to finance government repayments and EUR 10 billion euros to recapitalize banks. But such “aid package”, equivalent to Cyprus’ annual GDP, brought the public debt at 140% of GDP, thus making the current economic and financial perspective more destabilized. IMF refuses its direct commitment and assistance for countries, whose sovereign debt level is over 120% of GDP, considering this level as a very dangerous one, thus suggesting a “complete debt restructuring” and a devaluation of private sector assets, as it happened in the case of Greek crisis. Meanwhile, the Eurogroup and Germany refused direct commitment in supporting Cyprus, without the IMF participation. Even Russia was called to contribute with EUR 2.5 - 5 billion, a viable plan of cutting budget expenditures, the implementation of an intensive privatizations’ program, and above all, raising general taxes on capital gains and companies, typically in a country which so far has been considered as a “tax heaven “.

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But, by end-March 2013, the cost of rescue plan for Cyprus was reassessed at EUR 23 billion, from the initial EUR 17 billion. The EUR 6 billion’s difference has to paid by Cypriot State and bank depositors and, where the former must sell a part of its gold at its disposal. The recent proposal coming from Brussels by end-March puts plainly: no more than EUR 10 billion for debt relief, to avoid exceeding the ceiling of 120% of GDP, and EUR 13 billion to be raised and secured by “other means”. The “Gordian knot” which complicated the bailout aid package’s scenarios was the clause set by Brussels to “downsize the Cypriot banking sector, to establish a strong set of rules against money laundering, and above all, introducing a tax on bank deposits.” Eurogroup is openly requiring that a portion of the aid bill to be paid and borne by country’s bank depositors. Russian clientele is supposed to be in the front line, as despite that Cypriot central bank does not allow the publication of depositor’s nationality, almost EUR 18 - 25 billion are estimated as being deposited by Russians in the island, whereas Russian investments in Cyprus are ranked first, with roughly EUR 250 billion. Cyprus seems ready to accept a more rigorous European audit on anti-money laundering and “problematic” deposits, sheltered in its banks, but it was initially against the tax on deposits, labeling it as unacceptable and with catastrophic consequences, translated into an unprecedented bank hemorrhage. The debate was based upon the dilemma “whether to accept deposits taxation starting from EUR 20,000 with a 6.75% tax rate, or otherwise, taxing deposits above EUR 100,000 with a 9.9% tax rate?” The solution didn’t went so far, in case of Greece, Portugal, Ireland or Spain, as the Eurozone took all the responsibilities, while in “Cyprus” case, it required the Russian contribution with an amount of EUR 2.5 to 5 billion. Cypriot media highlighted numerous government ideas, by way of proposing the issuance of new bonds, bank restructuring, tailored policies to attract more foreign investments,

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especially Russian ones, using the privileged exploitation of potential energy resources, etc. The Cypriot Parliament was initially unanimous in rejecting the proposal for deposits’ tax, while citizens were unanimous in line with the decision of Parliament with the slogan: “Cyprus belongs to its people .... a united people is never defeated, etc. “. But beyond “a specific rescue plan for Cyprus”, a reality with which the Eurozone, ECB and IMF are “pretty accustomed” in recent years, the proposal to implement the “tax on deposits”, as a national contribution model, never implemented before to such scale, was the most debated and surprising fact. The need to find necessary money so quickly, by avoiding long-term and complex fiscal adjustments, along with the “aim” to engage foreign investors, particularly Russians, to make a “forced contribution” to the “Cypriot tax heaven”, constrained EU to make a taboo-breaking proposal, which “crossed the Rubicon”, given that Eurozone bank deposits are fully guaranteed up to EUR 100,000. The prevailing argument “justifying” such a drastic measure was based on specific features of Cypriot economy and the role of its banking system in the economy, particularly with very attractive interest rates this system offers for deposits, and large Russian presence in this the system. “Banks comprise the bulk of Cyprus’ wealth, so it is for them to contribute in resolving the impasse”, says Jeroen Dijsselbloem, President of Eurogroup. Fearing the worst case that Cypriot crisis could “trigger a banking panic precedent”, or could “cause an European-scale contagion”, Eurogroup guarantees that “such measure is deemed unique to Cyprus, as a specific isolated case”. However, this is the third case happening in Europe, so far. In 1992, when Italy was going through a severe financial crisis and should definitely curb the public debt at the earliest possible, it set a 0.6% tax on all Italian bank deposits, through which it managed to collect approximately EUR 15 billion (LIT 30 thousand billion of that time). This measure was accepted by all Italians, as “a collective effort to

strengthen country’s finances ... and not as a fiscal confiscation”, despite its serious consequences in triggering capital outflows from Italy. Even the “Norwegian case” in 1936, is identical as above, when the Norwegian government decided to levy the interest on bank deposits at 25% with the argument that “there was a need to tax more the capital”, which was not contributing sufficiently to the state budget. But even this tax was very short-lived, as the government feared the high rates of drop of bank deposits and capital outflows. The most typical in this regard is the case of Zimbabwe, which in 2008 confiscated all current accounts (deposits) in foreign currency, a move that sparked a harsh criticism, especially from IMF. It was for these reasons and for the above experiences, that such European proposal prompted eyebrows and skepticism, not only in Cyprus, but also among financial and banking experts, as being viewed like a “fiscal confiscation which affects not only large depositors, Russians or not, but above all it affects “normal depositors” en masse, who have no connections or to be blamed for poor management of public finances and the country’s crisis situation.” The failure of “Plan A” paved the road for “Plan B”, approved by Eurozone’s ministers of finance under which by the Troika (European Commission, ECB and IMF) will be granting Cyprus a financial assistance of EUR 10 billion (EUR 9 billion as a contribution by Eurozone through the European

“The “Gordian knot” which complicated the bailout aid package’s scenarios was the clause set by Brussels to “downsize the Cypriot banking sector, to establish a strong set of rules against money laundering, and above all, introducing a tax on bank deposits.”

Stability Mechanism, ESM, and EUR 1 billion guaranteed by IMF). Debt is granted for a period of 15-20 years. Cyprus must find another pack of EUR 13 billion, by way of liquidating Laiki Bank and collecting the tax on deposits above EUR 100,000 (EUR 10.6 billion), tax hikes (EUR 600 million), privatizations (EUR 1.4 billion), gold sale (EUR 400 million), the restructuring of the Bank of Cyprus, etc. The bailout plan for Cyprus imposes a drastic downsize for its gigantic banking sector, with assets amounting to EUR 120 billion, or 7-8 times of country’s GDP. The objective is to halve these assets (up to 3.5 times of GDP), by 2018. Cyprus must raise taxes, cut public spending and implement important structural reforms to ameliorate public finances, in order to guarantee debt repayment. It must walk from actual debt level of 150% of GDP at the level of 126% of GDP in 2015 and 104% of GDP in 2020. Three important “lessons” EU must draw from Cypriot banking crisis (1) The economic lesson: “blocking risky financial models since their inception”, which means stopping every effort to establish and develop banking and financial models, which enable banks

to accept deposits from “clients outside the EU” like: Russians, British, etc. In case of Cyprus, deposits of Russian origin are estimated at EUR 15 - 20 billion, out of EUR 70 billion in total deposits. Cypriot banking sector was 7-8 times greater than country’s GDP, thus escaping any public control. This fact, coupled with very high interest rates offered on these deposits, turned Cyprus into a “true tax heaven within Eurozone”. According to Mr. J.D. Giuliani, President of the Robert Schuman Foundation: “the Eurozone integration and unification cannot accept vague banking and financial models, which undermine the whole euro edifice.” (2) The organizational lesson: “the necessity to unify banking supervision and decision-making in Eurozone”. Cypriot crisis showed how important and urgent the transfer of supervisory powers to European Central Bank, is. The harmonization of monetary union with banking union requires eliminating “improvisations in finding solutions to crises which are hitting one after another the Eurozone”. According to Ms. Sharon Bowles, Chairwoman of Monetary Af-

fairs Committee at the European Parliament, “citizens and markets in Europe are confused by successive improvizations of Eurozone politicians “, thus provoking misperceptions about attitudes and various EU countries, such as: anti-german feelings. (3) The political lesson: “avoiding precedents for interference to banks’ affairs.” By imposing a tax on bank deposits above the EUR 100,000 guaranteed level, EU has built enough doubts to European depositors. Such precedent could turn into a negative element, with regard to political credibility of European leaders. In case of future crises, European depositors will be subject of an increasing destabilization by fear of subjective decisions that may affect their deposits. The elimination of this situation requires rapid progress towards a European radical reform in the area of bank deposit guarantee. European leaders and especially the Eurozone ones, must find a more transparent equilibrium between “the priority of not letting countries quitting Eurozone and the political and financial cost of intervention and bailout packages” for certain countries.

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SOCIAL CAPITAL

CREDINS BANK

BKT BKT, supports the establishment of the Laboratory in the Faculty of Natural Sciences BKT, in the framework of its social corporate responsibility policy on the education, in order to create better working and studying conditions to the students of this Faculty, completed the Computer Laboratory in the Faculty of Natural Sciences.

INTESA SANPAOLO BANK Corporate Social Responsibility is one of the core concepts of Intesa Sanpaolo Group and Intesa Sanpaolo Bank Albania, as part of it, is enhancing its efforts at building an integrated strategy involving all the stakeholders. Aiming at being simple in actions, but effective in their benefits, the bank believes that CSR starts with its employees, thus it promotes and keeps enlarging their voluntary engagement in the social and humanitarian field. Employees Donations for Orphans & Children from families in need, in Tirana, Durres and Shkodra state Orphanages, daily and resident centres Being loved and cared about are the feelings which children of the orphanages miss mostly, especially during end year feast atmosphere they needed and deserved our full attention and support. Sharing this idea, 90 Colleagues from Intesa San Paolo Bank became part of this very well organized CSR initiative, which took place during the last days of December 2012. The funds raised through this initiative were spent to cover kids’ most urgent needs according to the requests of the heads of these institutions. This was a great example of how effective and simple is to get engaged in making possible a better life for the community where we work and live in.

Children Carnival Party A very successful initiative organized in March 2, 2013 for the second year in a row, gathered 200 employees and 120 staff children in a unique atmosphere, dressed in the costumes of their favourites’ characters. Professional animators: the Clown, Magician, Princess and Spider Man organized different games and attractions for the kids: face painting, dances, karaoke, masks parade. At the end, colourful balloons of all forms were created for each of them. The aim was to emphasize the bank’s full support for improving the quality of its employees and their families’ life, bearing in mind the importance of work/life balance, appreciating even more the efforts of their parents in long working hours, fully trusting on the triangle: happy kids, motivated parents, successful business.

Credins Bank in cooperation with IFC, Canada, and support environmentally friendly projects in Albania Credins Bank in the frame of social responsibility activities has always supported renewable energy projects, and energy efficiency, promoting the efficient use of resources and reducing greenhouse gas emissions. The bank continuously has provided financing opportunities to Albanian companies interested to invest in efficient technologies in terms of energy and renewable energy projects. IFC, a member of the World Bank Group, with the support of the Government of Canada, supported Credins Bank to expand its financing of renewable energy and energy efficiency projects. IFC provided €10 million to the bank, including up to €1 million from the IFC-Canada, in order Credins Bank to stimulate investments in the sector. Training of Credins Bank staff from IFC, on the renewable energy financing On February, IFC launched a three day training on renewable energy financing for Credins Bank staff. The training lasted and was the first in a series of similar specialized trainings specifically tailored for select local banks in the Western Balkans comprising the most important technical, financial and legal aspects of renewable energy projects. The strengthening of local banks’ capacities especially in the area of project finance, will increase the opportunities to build a sustainable market involving renewable energy technologies, having on the focus small hydro power plants.

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NBG BANK ALBANIA NBG Bank Albania organized some activities in frame of social responsibility polices in Pogradec and Korça: Sponsorship of youth football team of Skenderbeg Club - NBG Bank Albania offered its support to the youth football team of Skenderbeg, by providing them the official uniform of the game and presentation. The participant on the ceremony, organized on this occasion in the sports fields of the club, were welcomed by Mr Ioannis Kougionas, CEO of NBG Bank Albania, the Secretary of the Sportive Club Skenderbeg, Mr Gjergji Raidhi and the trainer of the team, Mr Jani Kaçi.. Symposioum on “Economy and banks” - NBG Bank Albania organized at the premises of “Fan S. Noli” University the symposium on “Economy and banks”. Mr Ioannis Kougoinas, CEO of NBG Bank Albania and Mr Sulo Hadëri, Dean at Faculty of Economy, University of Tirana presented the topics on economy and the role of banking system. 15 years of presence in the city of Korça - NBG Bank Albania celebrated 15 years of the opening of the branch in the city of Korça. Partners and bank clients attended the event organized. Mr Ioannis Kougoinas, CEO of NBG Bank Albania informed the presents that NBG Group and Eurobank have joined forces to create one of the largest financial group in the region, that will not only be the strong leader in the Greece financial system, but an important player in the European market”. Activity for children in Korça and Pogradec- As a part of activities in the southeast region of the country, NBG Bank Albania organised a special activity dedicated to the children of elementary schools in Korça and Pogradec. The bank pays attention to the children, by providing special products that aim to promote saving for their future starting from early age. “Mili and friends” is a very attractive product that bank offers competitive interest rates and deposits without limits from parents and relatives. Support of distinguished graduates in Pogradec - NBG Bank Albania organised an activity at the high school of Pogradec to support distinguished graduates. The Head of Individual Banking Ms Aida Apostoli, introduced a special presentation on bank and its role. One of the contributions of NBG Bank Albania in Pogradec was the purchase of a smart board which aim the teaching process.

RAIFFEISEN BANK

Raiffeisen Bank donates flower for the teachers on March 7, Teachers Day Raiffeisen Bank Albania, on the occasion of Teacher’s Day on March 7th, took the initiative to honour all the teachers that are customers of Raiffeisen Bank, by sending a flower to each of them with the message, “Raiffeisen Bank wishes you Happy Teacher’s Day”. This initiative was enabled thanks to the collaboration of Raiffeisen Bank with Education Directorates throughout the country. The initiative was welcomed by more than 26,000 teachers that take their salaries in Raiffeisen Bank. Considering that the main focus of sponsorship policy of Raiffeisen Bank is the education sector, the Bank has sponsored several projects and activities in this direction. During the activities organised from Education Directorate of Fier, Lushnje, Durres, Berat, etc the best teachers of these cities were honored with a gratitude certificate

SOCIETE GENERALE ALBANIA “Love Can” Societe Generale Albania sponsored for “Rilindja Shqiptare” Foundation the organization of “Love Can” event. “Rilindja Shqiptare” Foundation, with the support of the Tirana Municipality has organized a city-wide event to raise awareness on the need for the social activism and promote active responsible citizenship, especially among youth in Albania. The events took place from February 12th to 14th and targeted more than 2500 people. Tirana Citizens were invited to serve in the following main activities: food programme for people in need, caring for terminally ill children at the children’s hospital. The event culminated with a concert in Pedonalja on February 14th. The event was marketed through social media such as facebook page, local media and local leaflet distribution in Tirana

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UNION BANK “A flower for the clients on the occasion of 7-8 March” On the occasion of 7-8 March, Union Bank organised local activities in all branches. There were organised meetings and were distributed symbolic gifts to institutions, employment centers and branches of the bank.

VENETO BANKA Veneto Banka “ For an European Tirana” In the frame of corporate social responsability , Veneto banka becomed part of an investment on the road “ Papa Gjon Pali II”, where are located the buildings of Albanian Radio Television and Italian Emmbasy. The modest contribute of Veneto Banka and other two italian entities in Albania, gave life to the “ For an European Tirana” project from Tirana Municipality. Veneto Banka and the youth of Kavaja Veneto Banka sponsored “Besa” sport team in the city of Kavaja. The sponsorship with sport equipments is a valuable initiative for the promotion of the sport and young talents in Kavaja. Actualy, the team of Besa ranks first at the albanian campionship U-19. The new uniforms with the Veneto Banka logo, already known in sport venues mainly in Italy as the official sponsor of Juventus, is a beutiful novelty to be seen in every stadium in Albania, where the U-19 and U-17 teams of Besa are playing.

RYDER ALBANIA ASSOCIATION – home medical care for terminally-ill patients and elderly people with chronic diseases

“Ryder – Albania” Association delivers a free service of home assistance (medical, psychological and social economic), for terminally-ill patients and elderly people with chronic diseases, HIV/AIDS, etc. It was established for the first time in Tirana, Albania in November 1993, with the financial support of “Sue Ryder Care Foundation” (SRC), in Great Britain. The main activity of association is to provide free palliative care at home of patients in Tirana and Durrës. Palliative care is a relatively new service in Albania. Terminal patients are patients who can not be treated in hospitals or by others services, because are considered as patients who have finished their treatment. “Ryder – Albania”, with a trained staff within and outside the country, is a pioneer of this new discipline in Albania. Patients are referred by public structures of the primary health care, oncologic hospital or personal referrals. Social workers interact with the medical team for the progress of palliative care and support the interaction with patients’ families. Since the founding of “Ryder – Albania” Association till December 2012, more than 6.000 patients have been assisted free at home in Tirana and in Durrës. About 69.5 per cent of our patients are in the ‘third age’. Currently, it is assisting 45 patients per day in Tirana, and 37 patients in Durrës. Any individual or institution could be part of “Ryder – Albania” initiative through project proposals, events and in-kind donations (medicines or medical equipment). For further information, please contact us: Address: Tirana, Rr. Ali Pash Gucia, Nd.9, H.7, Tel/Fax: 2452309 Durrës, Rr. A. Goga, L.6, Tel: 5230609 Email: ryderalb@icc-al.org

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A BANKER IN FIRST PERSON

“The mountain will tell me when I am old” - Paulo Coelho-

Climbing to Korab Xhevahire HOXHA

Head of Network Planning and Evaluation Section

Alpha Bank Albania

rs. Xhevahire Hoxha is Head of Network Planning and Evaluation Section in Alpha Bank -Albania. Although she considers a pleasure working with numbers and with numerous reports, she spends the weekends in the midst of nature, in stunning locations that few people have visited. Mountain climbing is an activity that is not expensive, but amazing; easy to start and to carry on, due to its diverse and appropriate nature. At the beginning of such passion, family, as well many friends of her did the same question: “Why you

love so much mountain climbing? Soon no one did the same question anymore, as they did understand that mountain climbing means life to her; something that never makes her feel tired but on the contrary gives her endless energy. “It’s an adventure” – she replies smilingly. “My curiosity makes me need and want to see what is over the next bend or up the next hill, and it doesn’t matter if her bag is heavy or the weather conditions are not the best because of rain, snow or hot day. The beauty of climbing the mountain is to sleep under the open sky, chat with friends around a big fire, to wake up in the morning by the light breeze or the music of a river or waterfall stream”. “Imagine that after 8 hours of hiking at the end you are at the top of Korabi Mountain but the incredible and breath taking view makes you forget the fatigue and you think how strong you are and that you have no limits; you feel free and proud that you did it…This do motivate and provide with the necessary energy to live the life with the same passion every day, make you a better person and a better professional.” Some of the heights reached by Xhevahire Hoxha: Korabi Mountain: 2764 m CRETA di Timau: 2218 m (Itali) Kleiner Pal: 1866 m (Austri) Rauchkofel: 2460 m (Austria – Carnic Alps) Hohe Warte - 2780 m is the highest mountain of the Carnic Alps Wolayer – 1900 m Lake at Cranik Alps

The Raiffeisen Bank’s flag on Himalayan peak Gerti PISHTARI Product Manager/ Corporate and SE Products Division

Raiffeisen Bank

verest is the highest peak of the world, with an altitude of 8848 meters from the sea level, thus being the summit of the world makes it a great goal, if not the biggest one, for any climber. Physically, it has been the most difficult climb that I have done until now. All the trip duration was about two full months, from April until the end of May (2012). It was just 3 years ago when our group firstly thought about Everest and since then, I have spent most of my free time training and climbing. In fact, we are the first Albanians to reach for the summit of Mount Everest. It has been a tradition since ever for every climber, who aims to summit a high altitude peak, to have his national flag with him. Of course, I had it with me, but it was not the only one; Raiffeisen Bank’s flag was alongside. Raiffeisen Bank - Albania was the main sponsor of the activity and for me, as a manager of the electronic banking product and reporting, it was like a duty, I did with pleasure, risking some more seconds at the summit, to take another picture, with Raiffeisen’s Flag. I did not leave the flag there, in fact, we returned it back, as a souvenir to the Bank. We chose the north route for climbing, which is in Tibet, China, which is less crowded, but more technical and risky. Climbing at high altitude is difficult as the higher you get, the thinner the air. Being at this altitude makes every step that you take a challenge. As for the hardest part about climbing the Everest, it was just seventy meters below the summit,

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when a rock fell from the peak and hit me on the knee. It was a big struggle as I had to gather all the powers left and all my motivation to achieve the summit and come back all right, with all that pain. As for the future, I am currently involved in the project “Seven summits”, seven highest peaks of seven continents. I have already done three of them, Everest, Elbrus, which is the highest peak of Europe and Kilimanjaro, the highest peak of Africa. The next one probably is Aconcagua, the highest peak of South America. The best advice for anyone who would like to climb the Everest is: “Believe it, that’s all possible!” Being mentally strong is the main part and train hard, of course. Everest is a mountain that will expand all your energy!

At the top of Himalaya

BALKANNET

INTERBALKAN NEWS

BOSNIA-HERZEGOVINA Sarajevo

Bosnia and Herzegovina’s Deputy FM meets the Director Raiffeisen Bank Balkans.com Business, sarajevotimes.com - 28.01.2013 The Deputy Minister of Finance and Treasury Minister Edita Dapo received the Director of Raiffeisen Bank in Bosnia and Herzegovina Michael Muller. Dapo announced at the meeting that all measures have been taken with the aim of repairing the credit rating of Bosnia and Herzegovina, which last year recorded a decline due to delay in the payment of foreign debt. Dapo thanked Muller for the honest cooperation, as well as an understanding of the business that the management and employees in Raiffeisen Bank had for the specific requirements and needs of the Ministry. Bosnia-Herzegovina records 4.27% credit growth in 2012 Balkans.com - 13.02.2013 According to Bosnia and Herzegovina Central Bank, credit growth in Bosnia and Herzegovina in 2012 was 4.27 percent. However, it is not enough for a dynamic recovery of the sector, and it is expected that there would be greater credit lending from banks this year. At the end of 2012 the total loans from the banking sector amounted to 15.73 billion KM.

BULGARIA

Bulgaria’s First Investment Bank made the only binding bid to buy smaller local lender MKB Balkans.com - 20.03.2013 Bulgaria’s First Investment Bank (FIBank) made the only binding bid to buy smaller local lender MKB Unionbank, Bulgarian newspaper Kapital reported. According to the report, FIBank offered about 100 million leva for MKB Unionbank, but any deal would also have to include a cash injection of about 350 million leva to replace short-term liquidity injected by the lender’s current shareholders. MKB Unionbank is owned by Hungary’s MKB Bank, itself a subsidiary of German Bayerische Landesbank (BayernLB). As part of its restructuring plan, approved by the European Commission last year, BayernLB has to sell most of its foreign subsidiaries.

CROATIA Sofia Bulgaria’s Commission for Protection of Competition gives green light to UBB-Postbank merger Balkans.com - 29.01.2013 Bulgaria’s Commission for Protection of Competition has issued a permit to United Bulgarian Bank, UBB, to acquire Postbank. The decision of the anti-monopoly body comes in the aftermath of the Greek one to merge the owners of the two banks – the National Bank of Greece (NBG) and Eurobank. The permit is issued to NBG, but in Bulgaria, similarly to Romania, Serbia and Cyprus, the merger will be between the two subsidiaries - UBB (NBG) and Postbank (Eurobank). After the merger, they will become the second largest bank in Bulgaria by assets, with a 15.3% market share.

Zagreb EIB supports smaller projects in Croatia with EUR 250 million tportal.hr - 28.01.2013 Representatives of the Croatian Bank for Reconstruction and Development (HBOR) and the European Investment Bank (EIB) signed a loan agreement worth EUR 250 million which the HBOR will use to finance smaller projects promoted by SMEs, mid-cap companies and municipalities in Croatia.The loan agreement was signed by EIB vice president Anton Rop and HBOR managing board president Anton Kovacev.

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Croatia hires banks for US dollar bond issue BNE - 14.03.2013 The Republic of Croatia, rated Ba1/BB+/BBB-, has hired Bank of America Merrill Lynch, Deutsche Bank, Goldman Sachs and JP Morgan to arrange a series of fixed-income investor meetings ahead of a potential US dollardenominated bond issue, according to market sources, IFR reported. A US dollar-denominated Eurobond issue may follow, subject to market conditions.

GREECE Athens

greater access to finances for less bankarised sectors of the country economy. Cooperation Agreement signed between the Central Bank of the Republic of Kosovo and the National Bank of the Republic of Macedonia BQK-20.02.2013 On the continuity of the expansion of international cooperation, especially with peer institutions, the Central Bank of the Republic of Kosovo, signed a Cooperation Agreement with the National Bank of the Republic of Macedonia. Besides all, the signed agreement foresees deeper cooperation in professionally developing the staff of both institutions with special focus in the areas of analysis and macroeconomic model, European integration, strategic planning, financial stability, payment systems and financial education.

MACEDONIA Greece: One in five mortgage loans turn bad Ekathimerini - 29.01.2013 The number of households who are unable to pay their debts is showing a meteoric rise due to the deterioration of economic conditions and the increase in taxation, with the difficulty being faced by many even to repaying mortgage loans showing the extent of the problem. Bank officials estimate that at the end of 2012 some 20 percent of borrowers were unable to service their housing loans, which amount to 15 billion euros. Greece: Deposits and withdrawals both rise in January Ekathimerini - 08.02.2013 The flow of deposits into Greek bank accounts continued in January, but it was matched by the amount of withdrawals for tax payments, according to bank officials. As a result, the total balance of deposits remained at 161.45 billion euros, the same level as December, credit sector insiders told Kathimerini, following a net inflow of some 5.5 billion in the last month of 2012. Given the new cuts to salaries and pensions and the increase in tax obligations, households are left with little option other than to use any deposits left for emergencies.

KOSOVO

FYR Macedonia to present new subsidized housing loan MIA - 28.01.2013 The Ministry of Finance presented permissions to new beneficiaries of the subsidized housing loan, part of the “Buy a House, Buy a Flat” project. The project is being carried out for a year and 110 citizens have obtained a subsidized housing loan with the government granting 640,000 euros of subsidies. FYR Macedonia: December data on banking system show growth of the deposit base MIA - 14.02.2013 December data on the banking system show growth of the deposit base, with simultaneous moderate monthly growth in the credit activity. Banking sector liquidity is consistently high, and at the same time, according to the preliminary data, increased efficiency of the banks and moderate reduction in non-performing loans have been registered.

MONTENEGRO

Pristina

Governor Gërguri hosted EBRD fact-finding mission in Kosovo BQK– 14.01.2013 Governor Gani Gërguri with his associates hosted a delegation of the European Bank for Reconstruction and Development (EBRD), headed by Mr. Jean-Marc Peterschmitt, Managing Director for Central and South Eastern Europe. The Governor invited the EBRD for a more comprehensive involvement in the Kosovo economy with special emphasis on providing opportunities for

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Skopje

Podgorica

Montenegro discusses preparations for EUR50 million development loan MNNews - 25.01.2013 The Ministry of Finance has discussed the preparations for a development loan amounting to approximately EUR50 million with the World Bank (WB) representatives. According to the Ministry, the Finance Minister Radoje Zugic met with a WB delegation led by the Chief

Economist Abebe Adunga, and their talks focused on the preparations for the development loan.

interest rate, currently the highest in the region, to help revive the economy, Serbian news agency Beta reported.

Montenegro’s banks propose NPL restructuring plan MNNews - 06.02.2013 A pilot project of restructuring non-performing loans (NPL), presented by eight Montenegrin banks, is expected to give concrete solutions to that problem, resulting in new laws or amendments to the current legislation. The World Bank and the Central bank of Montenegro have organized a workshop in order to address the problem of non-performing loans in the banking sector in a more efficient manner, with eight Montenegrin banks each presenting an example of dealing with a non-performing loan in practice.

National Bank of Serbia keeps the key policy rate at 11.75%. Balkans.com - 13.03.2013 The Executive Board of the National Bank of Serbia has decided in its meeting to keep the key policy rate at 11.75%. The Executive Board estimates that the present degree of Serbia’s monetary restrictiveness ensures, all other things unchanged, a return of inflation within the target tolerance band by the end of the year. The decline in year-on-year inflation will be supported by the consistent implementation of the fiscal consolidation program, achievement of a precautionary arrangement with the IMF, expected stabilization of agricultural prices, as well as implementation of the announced adjustments in administered prices.

ROMANIA Bucharest

TURKEY Romania’s CB governor urges banks to prioritize business lending Business Review - 12.02.2013 Romanian central bank governor, Mugur Isarescu, said that many banks have not changed their businesses to help companies and have continued to focus on consumer loans and mortgages, which are easier to sell. The central bank decided to maintain the key interest rate unchanged at 5.25 percent, in a key move designed to boost lending to the private sector. Banks in Romania employed 61,739 people last year, down 4000 from the previous year Balkans.com - 26.02.2013 Banks in Romania employed 61,739 people last year, down 4,000 from the previous year, according to data from the National Bank of Romania (NBR). Nicolae Cinteza, director of supervision department at NBR, said one bank in Romania is blocked from granting loans due to a low solvency rate. He added the growth trend of nonperforming loans has slowed down.

SERBIA Beograd

Serbia: Minister of Economy Dinkic urges central bank to cut rates to boost growth BNE - 07.03.2013 Serbian finance minister Mladjan Dinkic said he plans to ask the country’s central bank to cut its benchmark

Istanbul

Moody’s: Turkey’s banking system outlook remains stable Moody’s - 24.01.2013 The outlook on the Turkish banking system remains stable, says Moody’s Investors Service in a new Banking System Outlook. The key drivers of the outlook are (1) the rating agency’s view that moderate economic growth and improving sovereign financial strength will create supportive operating conditions for banks, despite downside risks from the euro area crisis, volatile markets and investor risk aversion; and (2) banks’ sufficient resources to absorb an expected gradual increase in nonperforming loans (NPLs). The Turkish Islamic banking sector will triple in 10 years Balkans.com Business News Correspondent - 22.03.2013 The Turkish Islamic banking sector will triple in 10 years, while the country would have even more potential if it would meet the foreign demand by offering more of a variety of Islamic financial instrument, an Ernst & Young report has said. The report says Turkish participation banks have expanded every year at an average of 19 percent and their commercial volume reached $1.3 billion in 2011, Hurriyet dailyreports.

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TECH TOPICS

REAL TIME ANTI-FRAUD MONITORING SET TO REVOLUTIONIZE FRAUD DETECTION

VAA and VRM is a combined solution for comprehensive fraud prevention, enabling card participating banks to better identify and stop fraud before it occurs

by Francisco JARAMILLO 1 General Manager South East Europe –Visa

ecurity has always been a cornerstone of Visa’s strategy and the recent introduction of the advanced fraud prevention technologies should come as no surprise. The new smarter, self-learning solutions, Visa Advanced Authorization (VAA) and Visa Risk Manager (VRM), offer financial institutions unprecedented levels of real time protection and responses across Visa’s entire global network. They are designed to increase security for Albania’s banks and provide even greater protection for Visa cardholders. It is not a secret that as cashless payments spread around the world, new fraud techniques evolve and get more sophisticated. Visa is fighting back with new technology to detect these emerging threats and help shut them down on the spot. VAA VRM has the ability to pinpoint and address coordinated attacks on multiple accounts in real time. By relying on one of the most advanced electronic payment networks, Albanian banks will now have access to a risk

management tool that get smarter with every transaction processed. VAA is security technology that ”scores” card transactions against their fraud potential based on the global activity and trends across the entire Visa network. The vast number of transactions passing across the network enables VAA to provide issuers with a risk score with unprecedented accuracy in real time. VRM enables banks to turn VAA’s unique global insight into immediate action by creating custom responses to decline or query suspicious transactions in real-time. Given the different criteria for different institutions, VRM lets issuing banks tailor their responses in line with their risk profile and their risk criteria. Currently, fraud detection is primarily based on identification, alarm and response. However, it is difficult to identify global fraud schemes if you have limited exposure to them, response times can be too slow to stop the fraud once the alarm has been raised, and being alerted to fraud once it has occurred often sees reactive responses that come too late. The new Visa system significantly reduces these risks and instead provides a proactive system that can alert early and act immediately - greatly reducing the number of

fraud attempts and the number of successful fraud attempts. What’s more the new system is self-learning remembering and recalling all new cases and trends. So, what is Visa Advanced Authorization? It is a security technology that analyzes and scores every Visa transaction for its fraud potential based on a global view of fraud across the entire Visa network. The risk score is generated from a real-time review of multiple aspects of each transaction including the cardholder’s previous activity and similarity to other suspicious transactions across the entire Visa

The system will be able to more finely target different types of fraud – even as they emerge – enabling issuers to more accurately isolate fraudulent transactions from legitimate ones.

Mr Francisco Jaramillo, General Manager, South Eastern Europe, Visa. He has been working in the card business and electronic payments industry in Europe over the last 12 years: as General Manager of Commercial Cards for Spain and Portugal in American Express, as Regional Director Strategic Business Development of Commercial Cards for Central Europe (Poland, Hungary, Czech Republic and Slovakia) in American Express, Vice President of Strategic Marketing Planning in Visa Europe, and now as General Manager for South East Europe (Albania, Croatia, Bosnia i Herzegovina, Kosovo, Macedonia, Montenegro, Serbia) in Visa Inc

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network. The issuer can use this valuable information to decide in real time whether or not to authorize the transaction. The system will be able to more finely target different types of fraud – even as they emerge – enabling issuers to more accurately isolate fraudulent transactions from

legitimate ones. In its turn, Visa Risk Manager helps financial institutions easily create, test and execute card authorization rules to help issuers decline fraudulent transactions. New rules can be deployed within minutes, responding to fraud trends as they evolve. Visa Risk Manager provides a number of capabilities including Visa Real Time Decisioning and Visa Case

Manager. Visa Real Time Decisioning gives financial institutions the capability to allow Visa to act on their behalf to decline or forward to the issuer for action, high-fraudrisk transactions using predefined rules created by the issuer. This real-time service addresses potential fraud as it flows through Visa so it never needs to reach the issuer. After transactions have gone through the issuer’s normal authorization process, the Visa Case Manager web application enables issuers to view, prioritize, and manage transactions that require further investigation. VAA and VRM is a combined solution for comprehensive fraud prevention, enabling card participating banks to better identify and stop fraud before it occurs. VAA can analyze a transaction in milliseconds and provide the card-issuing banks a risk score with unprecedented accuracy. Consecutively, VRM allows these banks to streamline decision-making, so they can turn insight into action. This remarkable speed and clarity can allow them to prevent fraud from occurring in the first place. For further information on VAA and VRM please visit: www.advancedauthorization.com

Jorgo DHROSO, IT Manager, NBG Bank Albania

Erion MAXHARI, Head of Card Department, Fibank

Our Bank considers extremely important the safety and reliability of transactions that our customers complete using debit/credit cards. Prior to VAA, we were using standard reporting features to monitor this activity; however, given the increased trend of fraud in the country and abroad, we were aware that a different (more qualitative) approach was needed. VAA was an interesting option given the fact that it had several significant benefits. It could be tried free of charge for a certain period, so that you can easily decide whether it fulfills the needs or not. There is no need for initial investment in HW or SW – you simply register and start using it through the simple and friendly web interface. A unique feature is the transaction score which is generated by using the information that Visa processes worldwide - no other proprietary system can offer you this type of global intelligence. Finally, the operational costs are really low compared to the service that it offers back. In my opinion, VAA is a really nice tool that can be used by all the banks which currently do not have an Anti-Fraud system while it can certainly offer additional value even in banks that currently operate one.

Fibank is one of the three banks in Albania testing VRM. When we first used it we could identify potential fraud in a very short time on some scored transactions as they were filtered through rules. The system and the user gets better and better each day so it is a two way learning process. With the flexibility in VRM we are now able to decline risky transactions on the fly and in some cases when we have a confirmation from the cardholder that the transaction is OK, we can exclude that card in minutes, in order to get an authorization. We believe that Fibank cards customers beside other advantages of our cards will now be more protected, as we are assuring them with the fastest way to detect fraud. They have to think only to have Fibank cards, use them and make their life easier through their benefits.

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FINANCIAL AUDITORIUM

LOAN COMMITMENTS Most business loans are made under loan commitments, as there are several good reasons using them either from banks or their (business) clients; they are an integral component of relationship banking. prepared by Junida TAFAJ AAB

ecently researches have begun to study the determinants of loan commitment or line of Credit Contracts. Such contracts play an extremely important role in bank credit allocation. Over 70% of U.S commercial and Industrial loans are made under loan commitment. Loan commitment contracts have importance both at micro level, in terms of the bank- customer relationship and at the macro level, in terms of the channels of operation of monetary policy. A loan commitment is a promise to lend up to a pre-specified amount to a pre-specified customer at prespecified terms. Such a promise is tenable for a pre-specified time period (not to be confused with the maturity of the loan). The terms

usually specify how the interest rate on the loan will be computed, the maturity of the loan, and the use to which borrowed funds will be put. The bank’s compensation for selling the commitment comes in a variety of forms, used in various combinations. It can take the form of a commitment fee that is expressed as a percentage of the total commitment and paid up front by the borrower when the commitment is negotiated. It can also take the form of a usage fee that is levied on the unused portion of credit. Quite often, commitment and usage fees are employed simultaneously. Also frequently used are servicing fees on the borrowed amount to cover the bank’s transactions costs, and compensating

balance requirements that are deposit balances the borrower must keep with the bank during the period of their commitment relationship. Uses of Loan Commitments Most business loans are made under loan commitments. These include construction and land development loans as well as loans to finance leveraged buyouts (LBOs) and mergers and mergers and acquisitions (M&A). Loan commitments also include backup lines of credit on commercial paper (the bank agrees to lend to the customer as an alternative to its issuing paper) and note issuance facilities (called NIF, in which the bank agrees to buy the short-term notes of a borrower if the latter is unable to sell them in the markets.)

Such an arrangement yields benefits for both the borrower and the bank. The borrower has a guarantee of credit at a given interest rate whenever desired during the specified period. The bank receives interest income on the portion of the credit line that the borrower draws upon, and the bank receives noninterest fee income on the unused portion. www.aab.al • BANKIERI • 39

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Uses

Interest Rate Insurance

Fixed Rate

LOAN COMMITMENT Variable Rate

Kinds of Loan Commitments In addition to use, loan commitments can be classified according to the nature of the interest rate insurance provided to the customer. Commitments vary in the extent to which they provide insurance to the borrower. A fixed- rate loan commitment gives the customer the right to borrow at an interest rate that is known in advance and hence eliminates all interest rate and availability uncertainty. The more popular variable-rate (or fixed formula) loan commitment does not hold the borrowing rate fixed. Rather, it determines the rate according to a formula that involves some index rate. Two common formulas are: additive and multiplicative. The additive version of the variablerate loan commitments stipulates a borrowing rate that is an index rate (e.g. LIBOR) at the time of takedown plus a fixed add-on. The less frequently used multiplicative version stipulates a borrowing rate that is an index rate at the time of takedown multiplied by a specified constant. Rationale for using Loan Commitments There are several reasons that explain the growing importance and usage of loan commitments. Banks have the following incentives:

(a) Regulatory Taxes: Until the commitment is actually taken down, there is no loan, which means no funding has actually taken place. Consequently, the bank needs no deposits until commitment takedown, which implies that reserve requirements do not affect the commitment until that

• Construction and Land Development Loans • LBOs • M&A • Working Capital • General Business Purposes

time. (b) Contractual Discretion and Reputation: Since contingent claims are promises to deliver something in the future, but invariably involve “MAC clause1” that introduce contractual discretion and permit the bank to not honor its promises under “extenuating” circumstances, issuing such claims gives the bank improved ability to manage its overall portfolio of financial and reputational capital. So, this decision can be seen as an optimal trade-off by the bank between its reputational and financial capital, and it is essentially an act of liquefying its reputational capital, as it cannot be directly traded, like its financial capital. (c) Demand Forecasting: Bank can,

through loan commitments, obtain valuable information about future loan demand. This is so because customers will purchase commitments for amounts that are related to their expected future borrowing needs.

Clients have the following incentives: (a) Risk-Sharing Considerations: With a fixed-rate commitment the bank bears both the risk of changes in the index rate as well as of changes in the borrower’s credit risk premium, whereas with a variable-rate commitment the bank bears only the latter risk. In either case, the risk-averse borrower is transferring (some) interest rate risk to the bank. (b) Moral Hazard: A loan commitment provides a means for the bank to circumvent the distortionary ef-

fect of the loan interest rate without relying on more costly alternatives. This can be achieved by lowering the interest rate on the loan to a level sufficient to eliminate (or significantly diminish) moral hazard. So, borrowers may demand loan commitments because they are able to borrow on better terms under commitments than they could in the spot market.

(c) Liquidity Guarantee for Other Creditors: When a firm purchases a loan commitment, suppliers of inputs to the firm know that the firm will have access to liquidity equal to the amount of the commitment. This may reassure suppliers that the firm will have the funds necessary to service its debt obligations to them.

(d) Protection Against Future Credit Rationing: A borrower’s future

access to credit is threatened by three possibilities: (1) deterioration in its own credit rating, (2) deterioration in the general market availability of credit, and (3) changes in bank-specific factors that diminish the bank’s ability to provide credit. A loan commitment may protect the buyer against the first two possibilities.

(e) Reducing Market Incompleteness:

When the capital market is incomplete (the lack of risk-sharing opportunities) and the loan commitment produces a payoff stream for the borrower that cannot be replicated by linear combinations of existing securities, then the availability of a loan commitment reduces market incompleteness.

MAC - Material Adverse Change. A clause which allows the bank to dissolve the commitment if the customer’s financial condition has “materially” deteriorated between the time the commitment was issued and the time the customer can exercise it.

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AAB

AAB ACTIVITIES AAB – ON FINANCIAL EDUCATION AAB, Bank of Albania and Ministry of Education organized the activity “The importance of Financial Education”, part of global week on financial education - 20 February 2013 AAB, in collaboration with Bank of Albania and the Ministry of Education and Science organized the activity: “The importance of Financial Education”. The activity was organized at the premises of Economic High School in Tirana, in the frame of “Global money week”, the international week dedicated to youngsters’ education with concepts of saving, banking, banking products and financial tools. Students and teachers were greeted by representatives of the Albanian Association of Banks, Bank of Albania and Ministry of Education and Science. The event was organized following the commitment to economic and financial education for the general public, by Bank of Albania and Albanian Association of Banks.

AAB –TRAININGS Training course on “Credit Risk Management”, 20-22 February, 2013 AAB in cooperation with Financial Engineering Institute on Banking and Insurance – Tirana, organized a threedays training course on: “Credit Risk Management”. The course, designed to provide a comprehensive overview of how to build a successful credit risk management by using the most up to date credit risk identification, measurement, control and replication, was attended by 12 credit risk departments’ representatives of 7 member banks.

Training course on “Costumer Care, Selling and Negotiation Skills”, 26-27 February, 2013 AAB organized a two-day course on: “Costumer care, selling and negotiation skills”, delivered by Mr. Paul Gauci. The course, focused on the best practice issues relating to customer care, selling and negotiation skills was attended by 14 participants from 6 member banks, who were encouraged to fully contribute to discussions, self-analysis participative exercises, role plays and other experiential learning activities to derive maximum benefit.

Training course on” Leadership Best Practices”, 28 February - 01 March, 2013 AAB organized a two-day interactive training program for managers and team leaders. The main objective of the course was to enhance their leadership, communication, motivation and team-building skills enabling better team effectiveness and results. The course was attended by 14 participants from 6 member banks was moderated by Mr Paul Gauci.

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Training course on “Business Continuity Management”, 6 - 7 March, 2013 AAB, in collaboration with Deloitte Albania, organized a two-day training course on: “Business Continuity Management (BCM)”. The course included an overview of BCM Program & the stages of the BCM and addressed issues focused on plan creation and documentation, Business Impact Analysis (BIA); availability and recovery strategies, training and awareness and maintenance and continuous improvement of BCM Program. The course was attended by 9 representatives, from 5 member banks.

Training course on “Train the trainers”, 27 – 28 March, 2013 AAB, in collaboration with Partners Albania, organized a training course on: “Train the trainers”. The training program covered in several sessions, topics such as: learning principles, training planning and organization and training management and delivery. The course was attended by 6 specialists of human resource departments and other staff involved with trainings, from 4 member banks.

AAB - FUTURE EVENTS

III ALBANIAN NATIONAL CARD FORUM “THE DYNAMIC FUTURE OF BUSINESS”

2nd ALBANIAN NATIONAL FORUM ON BANKS SECURITY 31 May 2013, Tirana

17 May 2013 Illyria 1, Hotel Sheraton Tirana

Abret Room, Tirana International Hotel

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