Albania’s banking sector has undergone significant transformation in the past decade.
The IMF reports that problem loans fell from 25% of total loans in 2014 to under 5% in Q1 2024, attributed to financial reforms and a strong macroeconomy.
Foreign bank ownership has decreased, with foreign-owned assets falling from 90% in 2013 to 65% in Q1 2024, reducing systemic vulnerability. Banking supervision has also been strengthened.
The IMF notes the sector’s resilience to recent shocks, maintaining profitability with an average return on assets around 1% (2019-2022) and 1.7% (2023-2024).
However, risks remain. Albania has high bank holdings of government securities, posing risks from the government-banking relationship. Bond and money markets are illiquid, hindering banks’ liquidity generation in stress scenarios. The economy remains euro-denominated, and real estate lending, which is concentrated in unhedged foreign currency loans, has seen rapid growth.
