World Bank to Support Albania’s Financial Sector Modernization

May 15, 2014

Development Policy Loan of US$100 million approved

WASHINGTON, May 15, 2014 — The World Bank’s Board of Executive Directors today approved a US$100 million Financial Sector Modernization Development Policy Loan to the Republic of Albania. The loan aims to strengthen the financial sector regulatory and supervisory regime and mitigate vulnerabilities of the bank and non-bank sectors.

The loan supports the Government’s reform agenda by addressing key challenges across the financial sector. A better developed financial sector contributes to stability; reduces the impact of financial crises, which can take a huge toll on economic growth; and supports poverty alleviation.

Specifically, the loan supports reforms in three broad areas. The first area focuses on strengthening the regulation and supervision of the banking sector and improving the financial safety net. These efforts are expected to improve banks’ crisis preparedness and enhance the deposit insurance framework.

The second area supports expediting the resolution of non-performing loans (NPLs). As result of these measures, the ratio of NPLs is expected to fall considerably by early-2015.  Reducing NPLs will safeguard financial stability and better enable banks to respond to credit demand. 

The third area focuses on strengthening the regulation and supervision of non-bank financial institutions. This seeks to strengthen the operational independence and capacity of the Financial Supervisory Authority, allowing it to regulate and supervise the non-bank financial institutions (NBFIs) more effectively.

The authorities are committed to continuing with a series of short- to medium-term reforms to encourage the development of the financial sector. These reforms entail activities that would further contribute to the country’s financial stability, development of financial markets, enhancement of financial inclusion, and improvement of corporate financial reporting. The World Bank Group will provide support to the authorities in implementing these reforms.

“The Albanian financial sector authorities have undertaken significant reforms to mitigate vulnerabilities in the financial sector,” says Mike  Edwards, Lead Financial Sector Specialist in the World Bank’s Europe and Central Asia Region and Task Team Leader of this operation. “We are encouraged by the financial sector authorities’ commitment to continuing and deepening reforms to improve non-performing loan management and resolution, the deposit insurance framework, insurance market development, public debt management, and the regulatory and supervisory framework for investment funds.”

The loan is a stand-alone single-tranche Development Policy Loan.

Albania became a member of the World Bank in 1991. Since then, 74 projects totaling US$1.3 billion have been supported by IDA and IBRD, and 49 projects totaling US$225 million by the IFC. The World Bank’s current portfolio in Albania consists of six projects in social assistance, infrastructure, water, energy, and land administration.  These are contributing to Albania’s efforts to achieve sustainable economic and social development and pave the way for European integration.

Media Contacts
In Washington
Kristyn Schrader-King
Tel : 202 473-9277
In Tirana
Ana Gjokutaj
Tel : 355-42 280-655