- Shoqata Shqiptare e Bankave

No. 19, April 2016
Bankieri
Publication of Albanian Association of Banks
THE REVOLUTION
MONEY WEEK 2016, IN ALBANIA
AAB MEMBERS
Content
Nr. 19, Prill 2016
Bankieri
Bankieri
No.19, April 2016
Publication of the Albanian Association of Banks
Botim i Shoqatës Shqiptare të Bankave
Editorial
Digitalization:
a boom or doom for the banking industry?
Elvin MEKA
Frontline
Digital banking and the Albanian banks
Enkelejd ZOTAJ
Albanian banking system - even more digital
Milena HARITO
Digital Banking
The wave of the future
Anni DASHO
THE REVOLUTION
DIGITAL
BANKING
The Revolution
Bankieri is the official
publication of the Albanian
Association of Banks which
mainly focuses on the Albanian
banking industry. Bankieri
provides readers with valuable
information on the financial
industry's developments in
general, and of commercial
banks in particular.
ALBANIAN ASSOCIATION OF BANKS
Street "Ibrahim Rugova"
SKY TOWER, 9/3, Tirana
Tel: +355 4 2280371/2
Fax: +355 4 2280 359
E-mail: bankieri@aab-al.org;
www.aab.al
Interview
Tirana Bank
A successful 20-year journey
with Albanian customers
Dritan MUSTAFA
Banking System
Student Loans
A market segment to be developed
Ilda VASO
Intensifying the consolidated supervision
A real must
Teuta BALETA, Rinald GURI
Forward contracts:
Their use in the Albanian banking industry
Niko KOTONIKA
Experts' Forum
The magic moment of peer-to-peer lending
Roberto RUOZI
EBTN's Triple E Standard
for quality in professional qualifications
Alexandra MANIATI
Success in retail banking:
A jigsaw beyond loyalty
Redi MËRTIRI
Economist Corner
The profile and features of economic growth
in Albania, 1992-2015
Adrian CIVICI
Social Capital
Banks Activities
Special
The 17 global goals for Sustainable Development the
commitment of Albania
Bas BERENDS
EDITORIAL TEAM:
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Elvin Meka
Editor-in-Chief
Eftali Peçi
Coordinator
Junida Tafaj (Katroshi)
Collaborator
Andis Rado
Photographer
Design & Layout: FCB Afirma
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Printed by:
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EDITORIAL BOARD:
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13
15
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20
23
25
28
30
34
Financial Auditorium
Syndicated Lending
A simple explanation of complex loans
Sonila TAÇI
37
Financial Education
39
AAB Activities
42
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Christian CANACARIS
AAB Chairman & CEO of
Raiffeisen Bank Albania
Gazmend KADRIU
AAB Vice Chairman & CEO
of Union Bank
Periklis DROUGKAS
AAB Executive Committee
Member
& CEO of Alpha Bank
Albania
Seyhan PENCABLIGIL
AAB Executive Committee
Member
& CEO of Banka Kombëtare
Tregtare
Frédéric BLANC
AAB Executive Committee
Member
& CEO of Societe Generale
Albania
Bozhidar TODOROV
AAB Executive Committee
Member
& CEO of FIBank Albania
Endrita XHAFERAJ
Secretary General,
Albanian Association of
Banks
Hysen ÇELA
Chairman of Albanian
Institute of Authorized
Chartered Auditors (IKEA)
Adrian CIVICI
President of European
University of Tirana
Spiro BRUMBULLI
Chief of Cabinet, Ministry
of Finance
Enkeleda SHEHI
Chairwoman of Albanian
Financial Supervision
Authority
www.aab.al
Bankieri
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Alpha Bank Albania është lëshuese ekskluzive e kartave American Express® në Shqipëri.
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Editorial
Digitalization:
a boom or doom for the
banking industry?
It is imperative for banks to formulate a winning digital strategy,
either individually or collectively, in order to cope successfully with
the digital “tsunami”, which will undoubtedly touch and impact every
aspect of banking operations and business, ranging from product
development, risk management, capital requirements, human
resource management, etc. Otherwise and if left unattended, or
mismanaged, the digital revolution will turn into an imminent weapon
of bank destruction
Prof. Asoc. Dr. Elvin MEKA1
Editor-in-Chef
“When I go to Silicon Valley…they all
want to eat our lunch. Every single one
of them is going to try!” Such iconic
wording, anxiously articulated by Mr.
James Dimon, CEO of JP Morgan Chase
at the US investors day some two years
ago, summarizes the biggest challenge the
entire banking industry, be it commercial
or investment one, is currently facing
in the course of everyday business.
The challenge has a name: DIGITAL
REVOLUTION and it is pretty much
complex for banks, in the sense that
they have to “fight” in two fronts: the
digitization and the digitalization. If the
former front is intuitively understood,
perceived and consequently translated
into well-defined operational strategies,
many years ago with the proliferation
of internet, the latter one is far more
arduous, long-lasting and risky, up to the
point of business survival.
FinTechs with their innovative
business models like crowdfunding,
P2P, P2P and B2B, along with disruptive
technologies are seriously questioning the
banking business model, notwithstanding
the fact that it has been for banks which
have been pioneering the use of computers
and information technology. They are
attacking banking industry at almost
every vital point of their value chain
(loan-making timing, payments, capital
requirements, etc.) The attack is hugely
asymmetric, as fintechs are not regulated
like banks, but allowed to compete by
using similar principles, devices and
mechanisms, but with totally different
approach.
However, risk and reward walk side
by side, and banks could reap considerable
profits, if they adapt swiftly to the actual
trend. As McKinsey suggests in a recent
research… “that digital laggards could
see up to 35 percent of net profit eroded,
while winners may realize a profit upside
of 40 percent or more”. But to reach that,
banks must get familiar with the fact that
digitalization at banks and within banking
industry is not a choice, or even an option:
it is an existential decision, paradoxically
made out of banks’ will. Put in other
words, digital banking is a do-or-die
challenge for banks and digital innovation
resisting institutions will be soon
technically doomed, as key stakeholders,
including investors, clients, markets, etc.,
will hit back against their “conservatism”.
Additionally, banks have to admit that
they are conducting business in the era of
the Fourth Industrial Revolution (digital
revolution) and it will impact the current
banking business model, like previous
revolutions and innovations used to do
throughout history, by employing the very
same mechanism and principle of creative
destruction.
Although Albania seems to be a tiny
place for such revolution, the competition
from outside challenging players and
practices must not be neglected or sidelined
by banks. In this regard, it is imperative
for banks in general, and also for Albanian
banks, to formulate a winning digital
strategy, either individually or collectively,
in order to cope successfully with the
digital “tsunami”, which will undoubtedly
touch and impact every aspect of banking
operations and business, ranging from
product development, risk management,
capital requirements, to human resource
management. Otherwise and if left
unattended, or mismanaged, the digital
revolution will turn into an imminent
weapon of bank destruction!
Vice Rector for Academic Process, UET.
1
www.aab.al
Bankieri
5
Frontline
Digital banking and
the Albanian banks
The Albanian market has a unique opportunity, by
combining very little legacy of old technologies, together
with plain vanilla banking products. This situation allows
for projects in Albania, which cost billions in matured
markets, to be significantly simpler and less expensive.
by Enkelejd ZOTAJ
Head of IT & Communication Division, COO Area
RAIFFEISEN BANK ALBANIA
B
ill Gates’ famous saying “Banking
is necessary; banks are not”
represents a trend that pioneers
of technology are openly sharing. Such
thought is obviously provocative, but is
it true? The term “digital” itself, a very
popular in the early days of informatics
age, was left somehow in the shadows,
during following years, in favor of
more modern alternatives, like: process
automation, electronic channels, omni
channel, SOA. Nowadays, the term
has reemerged as a key word among
professionals, communities and think
tanks. Nevertheless, its meaning is
not the same; rather, it is broader and
deeper. A research form Altimeter
Group in 2014: "State of Digital
Transformation" from Brian Solis
sates that “the vast majority of people
Altimeter interviewed for this report
claimed they are undergoing Digital
Transformation, even though most of
them don’t know what it is.”
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As in any case, when a term gains
popularity fast and becomes part of
the culture and everyday conversations,
the possibility of misunderstandings
is high. One of the primary sources of
misuse comes from sellers and service
providers, who like snake oil sellers in
medieval times, promise to possess the
key of bringing traditional organizations
to digital age. Hence, before defining
what “digital” means, it is deemed as
important to spent a few moments
and agree on what it is not. It is not
the algebra of Bool, it is not the PC,
tablet or any other kind of hardware;
it is not a specific technology, not
even software; it is not something you
may possess, or for that matter which
can be purchased. McKinsey defines
“digital” as: “…we believe that digital
should be seen less as a thing and more
a way of doing things. To help make
this definition more concrete, we’ve
broken it down into three attributes:
(i) creating value at the new frontiers of
the business world, (ii) creating value in
the processes that execute a vision of
customer experiences, and (iii) building
foundational capabilities that support
the entire structure.”
Nowdays the digitalization refers
primarily to the transformation of
society with regard to our preferences,
practices, how we buy, how we consume
information, how we make decisions,
how we interact with each other, with
the state, with the organization, etc.
From the organization’s point of view,
the digital transformation consists
chiefly in the transformation of business
model, processes, product lifecycle,
and its entire value chain. Technology
is a tool the company may harvest for
adapting to the new realities and not
a purpose per se. In the meanwhile,
banks are living a shifting reality,
with regards to regulatory framework,
new competitors, shrinking margins,
cost increase, as well as phenomena
that did not exists, just few years ago,
like: crowdfunding, p2p lending, the
demands of a new generation, increasing
demand in quality from customers, the
reality of social media, and so on.
Most banks do feel the pressure
and have been engaging in projects,
usually called Digital “Something” in
this direction. In another study from
McKinsey with 5,400 IT projects
shows that, in average for large projects
approx. 45 % finish over budget, 7 %
with delays, and deliver 56 % less value,
compared to the original scope. This is
rather pessimistic. Meanwhile, there are
new players in the market, especially the
ones that target at global scale, from
Silicon Valley, where jeans and hoodies
have replaced dark suits and silk ties.
Many of these companies want a piece
from the banking market, by offering
advanced solutions for payments, risk
management, micro credit, etc. This
trend is captured perfectly by Mr. Jamie
Dimon, President and Chief Executive
Officer of JPMorgan Chase, the largest
American bank, by saying: “When I go
to Silicon Valley they all want to eat our
lunch. Every single one of them is going
to try”.
But how much banks need to
transform? Depending on how people
answer this, they fall somehow between
the two extremes. One extreme, with
Bill Gates as one of most notorious
representative, includes the doomsayers,
who predict dark times ahead for banks.
This group sees digital transformation
as the tide that will erase one and
forever most of banks, in favor of
companies managed from 24-year olds
with hoodies from Silicon Valley. Such
group includes sellers of technological
solutions, as well. The second group,
or the opposite extreme position,
includes people that view it as the new
pop song, a mechanism IT companies
use to push solutions that more often
fail than succeed, the next ingenious
Banks are today several
steps behind in embracing
the opportunities of digital
revolution. Some have not
even started, whereas some
call digital transformation
initiatives that address
pieces and bits of the whole,
or are just implementing
some specific technologies.
Only few banks are in pole
position. It looks like the
comfort and inertia of being
invincible for decades have
left marks.
marketing finding. Most probably,
this group is crowded with classical
bankers, or executives of different levels.
I believe that the reality is somewhere in
between. Banks will certainly face hard
times, but in the same time they have the
experience and resources to adapt and
evolve.
Banks are today several steps behind
in embracing the opportunities of digital
revolution. Some have not even started,
whereas some call digital transformation
initiatives that address pieces and bits
of the whole, or are just implementing
some specific technologies. Only few
banks are in pole position. It looks
like the comfort and inertia of being
invincible for decades have left marks.
I have to admit, the first rounds went to
newcomers, the technology companies,
the likes of PayPal, Square, Apple
Pay, Samsung Pay, Lending Club,
which in some regards are eating the
banks’ lunch. On the other side, some
banks are being very competitive and
innovative. Some global examples are:
Moven, Fidorbank, Simple, Number26,
Metrobankonline, Ally, or Telenor in
the region. These banks have departed
from the concept of brick-and-mortar
banking, thus becoming an integral
part of digital reality, their customers
are part of.
In our region, probably the most
interesting event of last years happened
in Serbia. The transformation of Telenor
mobile operator in a bank was sudden
and extremely successful, catapulting
it as the second retail bank in the
market, in a matter of three years. Like
banks, telecommunication companies
face fierce competition form the new
entrants, like: Viber, Skype, WhatsApp,
risking at becoming obsolete. The
survival instinct has made them as well
to turn their attention into the direction
of banks’ lunch, which this time looks
even more tempting.
What’s about the situation of
digital banking in Albania? The global
momentum is somehow delayed, as
there are not much big initiatives in this
area. We see an increase of customers’
demand for quality, mobility and an
increase in price sensitivity. Also, the
percentage of people that have access
to internet, either from home or form
mobile, is increasing rapidly. On the
positive side, it looks like the Albanian
market has a unique opportunity,
by combining very little legacy of
old technologies, together with plain
vanilla banking products. This situation
allows for projects in Albania, which
cost billions in matured markets, to be
significantly simpler and less expensive.
We can harvest the advantage of the
late birth, taking advantage of the low
complexity, learning from mistakes of
the others and possibly skip some phases,
in the process of maturity. Of course,
this would be possible only if the right
motivation exists. In Raiffeisen Bank,
the digital transformation is a strategic
direction. Most of the new initiatives
and budget go in this direction. Some
of the largest banks are undertaking
important investments in parallel, in the
same area. We see some important trends
in branch transformation, including
technologies that allow for accessing
banking service via self-service devices.
The radical modernization of electronic
channels is still not visible in a large
scale. The modernization of supporting
processes, I believe, is still a long way to
go. In meantime, the initiative of digital
signature with identity cards shows
clear potential, but further investments
in the regulatory framework, an
increased awareness and education of
judicial system are a must along with
imminent opening of digital signature
to other competitors, which could result
in lower costs. The relatively young age
of Albanians, the increasing internet
access and the relatively simple banking
market could make the ingredients of a
fast transformation in this regard.
As previously mentioned, the
opinion is split on two sides: the one
which thinks that banks are in trouble,
and they have just started, and the other
side that thinks that little will change. It
will be very interesting to witness what
the coming 5 years will bring aboard.
Will banks be part, or a victim of digital
revolution?
www.aab.al
Bankieri
7
Frontline
Albanian banking
system - even more
digital
Generally, even in Albania we notice a growing trend of
electronic money flow for phone credit recharges, payments
of TV fees, fines, bills, taxes, utilities, etc., which has led to a
reduction of cash, by channeling through electronic channels
some ALL 200 million, within a couple of years and with a
growing number of transactions.
by Milena HARITO
Minister for Innovation and Public
Administration, MIPA
T
he internet and digital technologies are transforming our
everyday lives with a pace
and proportions of a real revolution.
These fast and deep transformations
are widely regarded nowdays as the
second most important revolution,
after the industrial one. The digital
revolution, which kick started with the
transformation of all human knowledge
into a digital form and carried on with
an universal and remote access to this
knowledge, has created for the first
time in the history of mankind a new
situation: practically every person
now who has internet access in mobile
phone, i.e. in his hand, has got an
access, at a negligible cost, to almost all
knowledge generated by mankind, and
s/he can interact with anyone, instantly.
This is an unprecedented situation that
also marks a social revolution.
Albania, like Europe and the world,
is embracing this revolution, by opening
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new opportunities for everyone. In this
context, the Albanian government is
strongly committed to support and
promote digital initiatives, as a powerful
tool for modernizing governance,
increasing knowledge and openness
of our society, spurring economic
development and enriching citizens.
Albania has made significant progress
in the field of information society and
media. Our legal framework is almost
entirely according to the best EU models.
Laws are indispensable to modernize
the functioning of the state and public
administration through digitization and
internet, but Albania has also the basic
modernizing infrastructure: a complete
coverage of population with mobile
phones, a digital civil register and
the application of electronic
signature for different
services that banks offer
to their customers, ensure
savings, in terms of printing
and archiving costs, as well
as providing a fast and quality
service for clients.
electronic identification cards, as well
as a digital interactive infrastructure of
all government systems, which enables
the online delivery of public services,
through a unique portal, called
e-Albania.
Our population is young and uses
cell phones massively. The country has
built a developed infrastructure for
3G mobile internet and has recently
started 4G internet services, too.
Albanian citizens are fully equipped
with electronic identity cards that
allow electronic identification and
the qualified electronic signature.
Our governmental systems are
interconnected through a modern
infrastructure, initially created with EU
support and empowered during the last
two years with investments from the
Albanian government. The Government
Data Center, established according to
modern international standards, serves
to all central institutions, but also for
municipalities, on special occasions.
The portal e-Albania for public services
offers a number of public services,
where the most recent one is obtaining
health card, online. The actual trend is
to invest in digital education, both in
equipment and in curricula, given the
importance it has gained throughout the
world, where most complete example
is the digital education program,
announced by President Obama, in
early 2016. We have also encouraged
new
entrepreneurships
towards
innovation through incentive programs
and incubators, and such approach
will be soon reinforced with a special
program at the Building of Innovation.
Information
and
communication
technology, ICT, is the future of
economic development. Our mission
is to move quickly towards digital
economy. The Strategy "Digital Agenda
2015 - 2020", defines the government’s
vision and will in this sector, on our
road towards EU membership, aiming
at become part of the so-called "Digital
Single Market".
In terms of digital infrastructure,
the banking sector is among the most
developed sectors in Albania, due to
the presence of international banks,
which bring here the best practices. As
the Minister for Public Administration
and Innovation, I have been always
putting in the spotlight the use of new
ICT services in the banking system,
with the aim to facilitate services to
citizens within a short time, but also
to help formalizing the economy, by
reducing cash usage. This initiative
was started since the very first days
of current government, by enabling
the payment of utility bills, especially
energy bills for individuals through
mobile devices, within the first 300
days of the government, and this so
not only because it is a global trend,
but also because Albanian citizens use
them widely. Their use exceeds 100%,
while internet access via mobile exceeds
61%, which means that 60% of the
population has a device that can be used
any time to receive services, especially
make payments through it. Promoting
the cooperation between banking
operators, financial institutions and
service providers has brought the need
to improve the systems and filling some
gaps in the legal framework, in order
to create appropriate ground for using
new payment instruments for citizens,
but also for service providers and the
banking system, to reduce operational
costs and reduce the use of cash.
The participation of MIPA at
National Payment Committee (NPC)
indicates the importance given to
the use of digital tools, but also
an appreciation for the substantial
contribution in coordinating the
actions among stakeholders, in the
frame of using payment instruments
in general, and in government services,
in particular. The government has
set as a priority the improvement of
public services, including facilitating
the automation of payments, as one of
the mechanisms to combat corruption.
In this context, e-Albania portal
offers, since one year from now, the
opportunity to execute payments. It is
worthy to mention also the initiatives
taken by the government and MIPA
with regard to extending these services
toward that part of the population that
has no access to banking services, by
way of cooperating with some nonbank financial institutions. Today, the
presence of innovative companies, like:
MPAY, EasyPay or recently M-PESA
from Vodafone shows that people are
interested in making payments via
mobile phones, as it was expected.
Generally, even in Albania we notice a
growing trend of electronic money flow
for phone credit recharges, payments of
TV fees, fines, bills, taxes, utilities, etc.,
which has led to a reduction of cash, by
channeling through electronic channels
some ALL 200 million, within a couple
of years and with a growing number of
transactions.
The Albanian government
is strongly committed to
support and promote digital
initiatives, as a powerful tool
for modernizing governance,
increasing knowledge
and openness of our
society, spurring economic
development and enriching
citizens.
However, the increasing number of
services requires further adjustments,
overcoming the old methods of work,
beating the mentality of using booklets,
the counter use, but always establishing
strict security and procedural rules in
order to facilitate citizens' life, reduce
the service cost, as well as ensuring full
security in digital systems. Some banks
in Albania are working to integrate the
services of authentication and electronic
signature into banking services, where
Raiffeisen Bank and Societe Generale
have commenced a pilot program in
this regard. Raiffeisen Bank is piloting,
from January 2016, the authentication
service at one of its main branches in
Tirana, aiming to identify its customers
that carry out external bank transfers,
by reading the ID card with biometric
reader. Societe Generale – Albania is
working to integrate the electronic
signature service with its services
mainly for opening new deposits,
where the identification and contract
signing for opening the deposit is made
electronically. Also, some efforts are
made to integrate the authentication
service with bank's services.
Microfinance
institutions
are
working to integrate the authentication
and electronic signature service through
the identity card and fingerprint, chiefly
for signing the Consent Form, through
which the client concedes institution
the right to control the Central Credit
Register at Bank of Albania, but also for
quick signing of loans, mainly consumer
ones. Bank client identification through
the identity card and fingerprint is do
helpful in eliminating fraud and tax
evasion cases, etc., proving that the
person who receives the service is the
relevant person. Also, the application
of electronic signature for different
services that banks offer to their
customers, ensure savings, in terms of
printing and archiving costs, as well as
providing a fast and quality service for
clients. The use of electronic services
through secure electronic identification
and electronic signature, are powerful
tools to eliminate fraud cases in the
banking sector.
www.aab.al
Bankieri
9
Frontline
Digital Banking
The wave of the future
The migration to a digital banking world will not be smooth and
will lead to further fragmentation in financial service markets.
Banks must undergo a deeper modification of their business,
culture, and IT, and above all, will need to put innovation at
its core and use data to create new business, revenue and
customer engagement
by Prof. Assoc. Dr. Anni DASHO
Executive Director, UET- IT Solutions,
EUROPEAN UNIVERSITY OF TIRANA
N
ew developed and implemented technologies change
the way people behave and
interact in their everyday life. They
are changing the business world strategic context, by altering customers’
behavior and expectations, business
conduct and structure of competition,
so the banking industry is no exception at all. Most people in the banking
sector agree that digital banking is the
wave of the future. The views of what
‘digital’ means for banking are diverse,
and most of the experts/consultants
discuss and argue that digitalization
will reshape financial institutions fundamentally and will require a structur-
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al change in banking system.
“Digital banking” often gets confused with mobile banking and online
banking, because all these involve digital applications, in one form or another. Digital Banking is an urgency, not
an academic question, and nowadays
digital change goes beyond banking.
Digital banking is the incorporation
of new and developing technologies
throughout a financial services entity,
in concert with associated changes in
internal and external corporate and
personnel relationships, to provide
enhanced customer services and experiences effectively and efficiently.
There are two aspects to the digital
business evolution:
• Digitization, which is an optimization opportunity and it uses digital
means to make more efficient and effective and optimize existing resources
and processes, and this approach can
bring cost-reduction and increase agility,
• Digitalization, is a business opportunity and it uses digital assets and
capabilities to create new services that
are valuable to the customers, which
can bring differentiation, business innovation, and new revenues.
Digitalization creates new value
based on digital assets and capabilities. Most banks are working on the
first aspect, but have the opportunity to further develop the second one
as well. Indeed, digitalization goes
beyond simply substituting analog
or physical resources with their digital counterparts. Digitalization captures the notion of digital evolution to
change business models and the relationship between customer value and
company revenue.
But why are banks increasingly and
incessantly turning digital? There are
numerous reasons which could give
some explanations for this behavior,
but probably the most important and
influencing elements, causing a deep
impact on the digital transformation
of financial services are the following
trends:
1. The development of new technologies
The swift development of new
technologies, Internet, smartphones
and tablets, in less than 10 years,
along with the challenge of new entrants (operating digital-only products
and services) and new models, adds a
new dimension to the changing role of
banking.
Technology companies and startups rapidly expand their activities to
financial services, continually innovating and competing – or collaborating – with banks and other financial
institutions in various segments of the
financial markets or in activities that
do not specifically require a banking
licence. This contributes to pushing
banks to rethink the way they operate.
2. The change of customer expectations
The change is also coming from
new customer expectations. Today’s
customers are not the same as they
were ten years ago. Their expectations
towards products and services have
changed in just a few years. Digital
consumers belong to the digital native
generation, born and raised with Internet: the generation born between 1977
and 1994 considered remarkable technology wise, exposed to technology
since early childhood and impervious
to most traditional marketing; and the
generation born in the mid-90s to early
‘00s, accustomed to a media and online environment in which options are
virtually limitless.
Both generations are extremely
connected and rely heavily on smartphones/apps and even wearables to
enjoy the best customer-experience or
benefit from the most popular content.
They adapt quickly to new changes and
continually seek information or advice
on the Internet or social networks.
These digital consumers demand
more choices, immediate availability
and direct access to ready-to-use infor-
mation and services. They expect fast,
safe and simple banking products and
services. They want banks to provide
more than mere transactional services
and expect them to understand their
needs and to act as trusted advisers.
The digital challenge for banks
The migration to a digital banking
world will not be smooth and will lead
to further fragmentation in financial
service markets. To achieve the agility
and openness necessary to thrive in the
digital world, banks will be required
to equip a set of modern solutions, including multichannel customer experience platforms, advanced analytics for
CRM and marketing, and open platforms for appstores and APIs. Beyond
these, banks must undergo a deeper
modification of their business, culture,
Albanian banks and
digitalization
Banks in Albania have
struggled to purvey their
complex offerings in digital
channels where ultra-simplicity
is needed to engage impatient
online shoppers. Albanian
Consumers have hugely
benefited from the convenience
of web and mobile banking,
but have tended to view these
services as free add-ons to the
checking account.
Nearly one-third of Albanian
consumers now prefer to
search online for banking
products and providers, even
though most of them still go to
the bank branches to complete
their transactions. A redoubled
effort is needed to attract and
engage online customers,
with overall sales growth
increasingly affected by the
success of this effort.
and IT. In particular, a digital bank
will put innovation at its core and use
data to create new business, revenue
and customer engagement.
However, it must be clear that
“digital” is a journey, and not a destination, so banks, even Albanian ones,
must continuously and relentlessly
evolve at higher velocities to meet the
challenges of the digital age. Depending on their context, ecosystem and
strategy, each bank will be required
to assemble a different set of offers
and services to engage their customers
and create new value and revenues.
Everyone within banking industry
knows that the digital business evolution is not limited to retail banking,
thus other bank business lines (private
and commercial banking) would benefit from similar tools, principles, and
strategies, to drive customer engagement in the digital age.
As per above, banks will need to
cope successfully with the digitalization, as the wave of the future, by
crafting and implementing the following four identified digital strategies,
which will allow banking sector to
gain market share and control costs:
1. Launch a digital brand that’s
separate from a bank’s existing brand.
This allows the bank to separate its
digital offerings from the rest of its services and provide an entirely different
experience and pricing structure to its
online customers.
2. Eliminate paper and create a set
of digital processes in order to compete in a digital world.
3. Modernize the digital experience
so it more closely resembles all the other digital experiences the bank’s customers are having.
4. Add new digital capabilities
that go beyond Internet banking and
mobile banking to deliver new types
of digital assets. Possibilities include
standalone person-to-person and
digital payment services that target a
particular geography or market, and
digital wallets linked to the holder’s
bank account.
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Interview
Tirana Bank
A successful 20-year journey
with Albanian customers
Tirana Bank is here for 20 years in a row and its contribution
to the Albanian society has been and will be very important,
not only in terms of purely banking business, but also in
terms of corporate social responsibility. Tirana Bank is
particularly focused on the continuous support for people in
need and for valuable projects with positive impact on society
Dritan MUSTAFA
Chief Executive Officer
TIRANA BANK
T
he Albanian banking system
is reconfirming its stability
during recent years, by way
of consolidated indicators regarding
liquidity and capital adequacy
indicators. The economic and financial
developments in the region, mainly
within Greek economy, addressed
some specific risks of a temporary
nature, which were efficiently managed
by all stakeholders in the country and
were successfully overcome.
Despite the fact that the main
macroeconomic indicators are deemed
as positive, the Albanian economy is
characterized by a feeble consumer
demand and steady trend of savings,
as well as by a relatively low level of
public and private investments. These
indicators are decisive, in terms of
moderate rate in the banking system
development, which demonstrates
stability in terms of deposit portfolio,
but continues to face significant
challenges, in terms of improving
loan portfolio quality and an obvious
approach to resume the lending
process.
Tirana Bank continues to maintain
its position in the banking market,
through sound liquidity and capital
indicators, in compliance with the
strategic objective to optimize its
presence in the market. Our goal is
to maintain the position of Tirana
Bank within Albanian market and
to strengthen further a clear identity,
based on solid financial foundations.
Running Tirana Bank means being
part of Piraeus Bank Group, which is
currently the largest banking group in
Greece, with a 100-year experience,
as founded in 1916 and with 22.000
employees, at its offices in 10 countries
around the world. Group expertise and
its consolidated corporation profile is
an important support for Tirana Bank
activity in Albania. Our estimations
for this year will be characterized by
a cautious behaviour of banks towards
lending activities, persistent efforts to
keep non-performing loans portfolio
under control, as well as by further
reduction of interest rates.
Tirana Bank, as one of main banks
in the Albanian banking market,
has put the recovery of business and
lending activity as its main objective, by
acting simultaneously and intensively
to reduce the non-performing loans
portfolio. We intend to maintain our
position in the market at the current
level of our presence, in terms of
branch network, by keeping up the
high quality standard of customer
service.
Winbank – Tirana Bank’s digital
banking
We are fully committed to developing the business, creating the most
appropriate products and further
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improving the quality and service
infrastructure for the customer.
Our approach is oriented towards
improving the information technology
and to offer facilities, in accordance
with the need to modernize products
and services, toward the standards
of banking industry in the region
and beyond it. In frame of the high
quality standard of services, winbank
- Internet banking is currently one
of the most important platforms, of
which we are proud of.
Winbank is our integrated platform
for banking services in Internet, which
offers alternative channels of banking
transfers, such as: web Banking,
Mobile Banking, Phone banking,
winbank for credit cards and winbank
“Alert Signals”, for users of credit
cards. Digital Banking is one of our
strongest points and the banking of the
future, because the use of electronic
platform enables customers to carry
out full banking transactions, 24 hours
a day, 7 days a week, thus facilitating
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the banking transactions the customer
needs.
Tirana Bank was awarded as “Best
Consumer Internet Bank” in Albania
for 2014, by Global Finance, in
recognition of the group’s success story
in digital banking. This award shows
the great importance that we put on the
technology and alternative electronic
channels and we will continue to be in
line with the latest developments in the
area of technology, in order to provide
our customers with the best possible
services. Tirana Bank operates for 20
years in Albania and in this jubilee
year, digital banking is one of our
main strengths!
Tirana Bank – 20 years in Albania
I have the personal satisfaction to be
the head of Tirana Bank in this jubilee
year, during of which Tirana Bank has
its 20th anniversary of its opening,
since September 1996. In these 20
years, Tirana Bank and its customers
grew up together. As the first private
bank in Albania, the first businesses
and customers were in their first steps
and Tirana Bank was adapted to the
market and developed its business
according to their needs.
Tirana Bank deems employees
and the administration model, vision,
focus on superior customer service,
as well as appropriate financial
solutions, as the elements of particular
importance. Our focus to stay by them
and help them achieving the objectives
is quintessential to us.
Tirana Bank is here for 20 years
in a row and its contribution to the
Albanian society has been and will
be very important, not only in terms
of purely banking business, but also in
terms of corporate social responsibility.
Tirana Bank is particularly focused
on the continuous support for people
in need and for valuable projects with
positive impact on society. We grow
together with our customers and along
with all economic and social factors
of our country, striving to influence
positively on these factors.
Banking System
Student Loans
A market segment to be
developed
Over the years, student loans will naturally hit the market,
as driven by students, and such a demand will be dictated by
investments in human resources and infrastructure made by
university structures, and also by improved economic factors
by Ilda VASO
Head of Product Development Unit
Marketing Department,
CREDINS BANK
S
tudent loan is not nothing but
a financial aid, which must be
repaid over time. Such product
plays a takes a certain weight,
depending on the country in concern,
where the culture, education acts,
economic growth and development, as
well as a whole chain of social values
are considered as important factors in
this regard.
In our culture, higher education is
still perceived as a right, for which the
state should bear the main financial
burden. Actually, such perception is
still ubiquitous in almost all Europe,
where studies are financed, in a major
part, by the state and student loan is
less common. The situation is quite
different in the United Kingdom, or
United States, where about 60% of
students who finance their higher
studies by getting a loan. It is for these
countries, that student loan is almost
a necessity and plays an important
role in the students’ progress and
respective career in the future, where
the product is shaped in the proper
form and structure, thus adapting not
only to the student’s needs but also to
the prospect of a healthy career, which
will lead to final repayment of liability.
A basic student loan, upon a
reasonable perception of the product,
commences the payback period after
graduation. For example, in the
United States, student loans are mainly
disbursed by the state, upon complying
with certain criteria, and are usually
accompanied by a several-month grace
period, following graduation. Loans,
disbursed by financial institutions,
are pretty much more costly, because
unlike federal loans, the interests
are calculated since the beginning
of studies, although repayment time
follows them. In this case, students
pay interest on interest. However, the
experience of such countries has shown
that this investment has produced an
excellent return for the state, private
sector and the individual, him/herself.
As mentioned above, the development of this product is chiefly
related to the financing of higher
education system. The universities in
these countries are mainly organized
as NGOs and their source of funding
are student tuition fees, in agreement
with various donors and, and to a
lesser extent, the state. The universities,
themselves, ensure a set of student
internship contracts with companies
active in the industry, by providing a
guarantee that they will be employed
in such enterprises, at the end of the
studies. It is deemed that these factors
have been instrumental in forming the
baseline for the success story of such
product.
In our country, the effort to draft
student loan as a genuine product has
remained at tentative levels. This is so,
not for the lack of will by banks and
financial institutions, but because of a
bunch of factors, which have actually
formed a barrier, in this regard.
Student loan has been mainly shaped
in the form and around the features
of a consumer loan, with immediate
repayment, by a normal amortization
plan, thus throwing the repayment
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burden exclusively on student’s
parents.
Owners of private universities have
made strident efforts to find forms of
cooperation with banks, where the
university assumes the repayment of
interest, but the experience so far has
shown that this incentive has not been
enough to boost demand for student
loans. Also, legal opportunities to
allow any 3 - 4-year grace periods are
simply absent.
The new law on higher education
and the relationship of education
system with the industry are two
key factors that could facilitate
the functioning of this product in
Albania. Student loan is also closely
related with the economy’s capacity
to ensure employment. All these are
fundamental components of analysis
that help developers and providers of
such products and segments, to craft
and create products the market needs
and which are helpful for business
development. Lack of employment, the
intended use of the loan and the value
perceived by society, are clearly the
biggest obstacles in this regard.
The value chain, as per above
mentioned, is an intensively-used
concept in business activity. Higher
education is a public good and the way
it is perceived by the society is very
important. In the above cited models,
the value chain creation has passed
through private financing, in the
best interest of society, by removing
the burden of expenses from the
state. This is the main goal of higher
education reform in Albania, which
is based mainly on the US and AngloSaxon model: "building the value
chain through private funding, in the
best interest of the society."
In this regard, I think that the
reform undertaken by the Albanian
government will, in many ways,
have a significant long-term impact,
but above all on providing relevant
incentives for university structures to
be self-improving, thus reflecting such
impact on students, themselves. Over
the years, student loans will naturally
hit the market, as driven by students,
and such a demand will be dictated
by investments in human resources
and infrastructure made by university
structures, and also by improved
economic factors.
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Banking System
Intensifying the consolidated supervision
A real must
Such a discussion is necessary to commence even in case of combined supervisory
architecture in the Albanian market, were several combined structures of financial
groups have been created, and they are evolving and expanding
by Teuta BALETA and Rinald GURI
Experts for financial regulation
I
n the global financial environment,
where competition grows and users
of financial products have increasingly
sophisticated demands, the degree of
products ‘complexity is going north. The
efforts of financial institutions to increase
efficiency, revenue and risk diversification,
as well as to gain weight in the markets,
have given life to creation of financial
conglomerates. Such "creatures" are
groups of institutions, licensed to conduct
banking, insurance or capital market
activities, which are exposed, altogether,
against additional risk which are known
as "group risk".
Such groups are real challenges to
regulation and supervision process,
because of the opportunities for regulatory
arbitrage, caused by various supervision
standards, or lack of consistency in
the legislation which regulate different
financial sectors. Also, such groups
create premises for conflicts of interest,
management
complexity,
spillover
effects, enhanced systemic risks and most
importantly, a multiple use of the capital
unit. In this regard, the supervision on
the basis of a certain institution/financial
activity is not enough to encompass the
full spectrum of risks.
The standards of consolidated
supervision are developed to correct the
supervision & oversight process, where
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the most typical is the EU Directive
on Financial Conglomerates. A joint
forum of the International Association
of Insurance Supervisors (IAIS), the
International Organization of Securities
Commissions (IOSCO) and the Basel
Committee on Banking Supervision is
currently operating, on an international
scale, to ensure a consolidated supervision.
In the case of exercising the consolidated
supervision, it is essential for the relevant
regulatory authority to achieve:
• Knowledge about group’s general
structure and all important components
of the group, domestic or foreign ones,
as well as supervising and regulating all
activities;
• Having a supervisory framework
that assesses risks of non-banking activities and their relative impact on the
bank;
• Having agreements with other regulators / supervisors to get information
on financial status and risks.
However, in these cases the focus
remains on the bank or banking group,
which is in the center of the financial
conglomerate, and not on the supervision
of other units. Other units are considered,
proportionately to the extent of their
impact on banks’ reputation and financial
health. In short, supervisors focus on
evidencing and closing channels of
problems’ spillover. This is the spirit even
in drafting the consolidated supervision
provisions in the Albanian legislation
(banking and insurance, respectively).
Meanwhile, it is worth highlighting the
fact that insurance legislation has made
further steps, by defining and extending
the spectrum of financial supervision up
to financial conglomerates, thus being so
aligned with the best standards in the field
and EU directives.
Another aspect of supervision, which
includes more than one type of financial
institution, is the so-called "combined
supervision", which deals with risks
Another aspect of supervision,
which includes more than one
type of financial institution,
is the so-called "combined
supervision", which deals
with risks created for a set of
combined group of financial
institutions, without focusing
exclusively on one bank/
insurance company or group of
banking/insurance companies,
but instead on shifting the
problem from one institution to
another, or throughout the group.
created for a set of combined group of
financial institutions, without focusing
exclusively on one bank/insurance
company or group of banking/insurance
companies, but instead on shifting the
problem from one institution to another,
or throughout the group. Such structures
can be transformed or not into systemic
risks, but they, themselves, elevate the
complexity degree of supervision and
regulation. The situation gets more
complicated when combined groups of
financial institutions are supervised by
different authorities. This increases the
risk of partial supervision and failure to
identify, in due time, problems developing
within the group, and therefore, taking
delayed corrective measures.
In a systemic framework, such groups’ risks are intended to be managed
by financial stability councils, which
have clearly defined tasks for oversight/
supervision macro policy, or coordinating
the functions of various regulatory
authorities. For example, in Croatia, as
country of the region and EU member, the
functioning of financial stability council is
regulated by a special law.
At group level, another widespread
form of carrying out the consolidated
supervision is reaching agreements with
other regulatory authorities to exch-ange
information and carry out joint inspections. However, the effectiveness of such
a mechanism depends chiefly on how
systematic, the implementation of these
agreements, is in practice. This element
has a particular importance, to the point
that even the Government Audit Office
(GAO) in US audits the cooperation
performance between financial regulatory authorities. Moreover, the interest
of special regulatory authorities to
address risks with transparency and comprehensiveness, or their ability to identify
the significance of certain developments
in the markets or institutions, which
fall out of their focus, on institutions
they supervise, may not be the same.
Consequently, the trend and preference, in
many countries, has been to consolidate
the supervisory functions under a sole
authority, to ensure clearly defined
supervisory responsibilities.
Such a discussion is necessary to
commence even in case of combined
supervisory architecture in the Albanian
market, were several combined structures
of financial groups have been created,
and they are evolving and expanding. The
following scheme is just an illustration. It
does not identify institutions by names,
not for the sake of confidentiality (data on
names of institutions, their properties and
assets are publicly available), but for the
purpose of focusing on the complexity,
such combined financial groups, are
displaying in Albania. The scheme depicts
financial institutions, which are part of
international groups, with combined total
assets of significant weight to GDP, which
causes complex structure of ownership
and management, and significant
exposure toward developments of an
economy. A similar group combination
is evidenced even in the case of financial
institutions, owned by domestic capital.
It is crystal clear that, such group
combinations of institutions need a more
structured supervisory and regulatory
process, at least in three respects: (i) joint
risk analysis, arising from the inclusion
of existing financial institutions into
new financial activities; (ii) coordination
of regulation process, to prevent
unregulated areas; (iii) exchange of
financial information and joint inspection
of group activity. In particular, it is
deemed as important having a systematic
discussion, to identify financial groups.
This discussion, undoubtedly, cannot
exclude the more efficient configuration
of supervisory authorities, to ensure the
same supervision standard and excluding
loopholes to escape the supervisory focus.
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Banking System
Forward contracts:
Their use in the Albanian
banking industry
The existence and improvement of a financial market,
which would create opportunities for all market
participants to execute financial transactions that make
it possible to remove the uncertainty especially in times
of high volatility, would be a step forward for further
development of the overall financial market.
by Niko KOTONIKA, CFA
Head of Treasury
NBG BANK ALBANIA
S
trong movements of exchange rates,
as a consequence of the increased
volatility in international markets, and
where USD/ALL exchange rate, impacted
by movements in international markets, has
been appreciated by approximately 25%
during last year only, showed how important
is to hedge the foreign exchange exposure. In
this way, it is necessary to develop the local
market with financial derivative products,
which provide all market participants
with the possibility to execute the desired
hedging. Given that the banking system
acts as a market maker for the majority of
financial products and services, the role of
banks in creating and developing the FX
derivative markets is very important.
The most simple derivative product
than can be used in this case is the forward
contract. Forward contracts are contracts
signed between two parties which agree to
execute a financial transaction on a future
date, with a predefined price. Forward
contracts should not be confused with
options and futures. Options offer to the
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buyer the right, but not the obligation, to
execute the transaction whereas futures are
largely standardized contracts, their trading
takes place mainly in organized exchanges,
and they can be bought or sold, separately.
Forward contracts are customized to the
needs of the buyer and seller and are traded
In order to facilitate the interbank
market, the AAB Treasury
Committee has prepared a Draft
Master Agreement, following
international best practices,
which would facilitate not only
the development of FX forward
market between banks, but could
also be used for other types
of financial derivatives, such as
foreign exchange swaps, etc.
mainly over-the-counter. These contracts
can be modeled for all kinds of financial
transactions, including foreign exchange,
interest rates, etc. The most common
contracts that are currently being traded in
the Albanian financial market are foreign
exchange forwards. Despite that, there is
a market for these contracts, but it is still
weak and illiquid. The actual demand for
these products has been generally low. One
of the main reasons of weak demand is
that interest rate differentials, included in
the price calculation formula between local
(ALL) and foreign currency (EUR or USD),
have been significantly wide. For this reason,
the forward price would be much higher
from the spot price, thus losing attractiveness
and interest of the investors to execute such
a transaction. The recent narrowing of such
interest rate differentials, as a consequence
of the decline in Treasury Bills yields should
have increased the attractiveness for these
products. Despite this, the lack of financial
education, especially related to products
that could be used to hedge financial risks,
remains a significant obstacle in this regard.
Comparatively, in international markets
these contracts occupy a very important
part in the total trading volume of foreign
exchange products. According to a study
performed by BIS Basel on foreign currency
markets, FX forwards share 13% of the
international market. FX Swaps that are
used generally for liquidity management
come in the first place with 42% of the
market, spot transactions in the second place
with 38% of the total market and forward
transactions come in third. The same study
shows that the total size of the FX forward
market in 2013 was increased into USD 680
Billion, up from USD 475 billion, that was
the size of this market in 2010. This shows
that foreign exchange forward products in
international markets are not only popular,
but have showed a clear trend of growth.
Taking into consideration that we are
mainly an importing country, forward
contracts would act as a very good
protection for importers, which have
scheduled their payments in foreign currency
on a future date. A forward contract would
be beneficial also to local companies that are
exposed with foreign currency loans, and
also exporters waiting to receive a payment
in foreign currency in the future. Although
theoretically possible to structure a foreign
exchange forward contract for individual
clients, practically it is almost impossible
for this type of contract to be closed for
small amounts. The reason behind is that of
high costs of hedging that the bank has to
perform at the moment it enters into such
transaction. In this regard, FX forwards can
be used by companies or individuals that
The most common contracts
that are currently being traded
in the Albanian financial market
are foreign exchange forwards.
Despite that, there is a market
for these contracts, but it is still
weak and illiquid.
spot exchange rate, as well as the interest
rates that should match the maturity of the
forward contract. In order to have a perfect
hedge when entering a forward contract,
these interest rates should represent, to
the closest extent, the reality of borrowing
or lending funds in the interbank market.
The actual trading in the money market is
focused mainly in short term activity (up to
one week), which makes it difficult to set a
fully hedged price for a forward contract.
Further development of the collateralized
market, through
Repo
agreements
extending beyond one week, and also the
creation of an interbank FX swap market,
which are also derivative products used for
liquidity management, as the two necessary
elements in the improvement of the abovementioned infrastructure. In order to
facilitate the interbank market, the AAB
Treasury Committee has prepared a Draft
Master Agreement, following international
best practices, which would facilitate not
only the development of FX forward market
between banks, but could also be used for
other types of financial derivatives, such as
foreign exchange swaps, etc.
2. Promotion of these products,
as well as education of exposed clients in
relation to the importance of being hedged
against different risks, such as the foreign
exchange risk, would also be another very
important element that would foster the
demand for such products. This would be
beneficial to all parties involved; banks would
ensure an additional opportunity to increase
business and profitability, whereas clients
would obtain an additional opportunity
of being hedged from unexpected moves
of foreign exchange rates. The increase of
trading volumes would reduce margins, by
increasing attractiveness for such products
for all market participants.
It should be noted, however, that being
hedged through a forward contract, would
mean a foreign exchange neutralization
effect for clients, who would give up any
potential profits, which would be realized
in case of any favorable foreign exchange
movement for them. The decision to be
hedged or not is a decision that requires a
thorough judgment, which involves not only
the risk analysis, including the ability and
the desire of risk taking, but also the desire
for profitability from foreign exchange
movements of the exposed stakeholders.
However, the existence and improvement
of a financial market, which would create
opportunities for all market participants to
execute financial transactions that make it
possible to remove the uncertainty especially
in times of high volatility, would be a step
forward for further development of the
overall financial market.
have a big cash flow payment activity in
the future, only, and who need protection
from foreign exchange volatility. Banks have
the risk that, in case a forward contract is
not executed at the maturity date, they
could face losses, as a consequence of the
difference of the forward price agreed with
the spot exchange rate at the settlement
date. However, such risk can be avoided
by requesting a guarantee, which acts as a
collateral that protects the bank, in case of
non-execution.
In order for this market to be developed
in Albania, there should be improvements in
the market infrastructure, related to supply
factors, as well as by promoting further the
demand for these products as per following:
1. Further development of the
money market, is a necessary condition.
That is so, because when pricing a forward
contract, financial institutions, which act as
market makers, take into consideration the
1
Triennial Central Bank Survey, Foreign Exchange turnover in April 2013, September 2013, Bank For International Settlements.
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Experts' Forum
The magic moment of
peer-to-peer lending
It is essential to find and strengthen new sources and new
types of lending. In this sense, the P2P and P2B lending
may represent one of the solutions and it is therefore
necessary that both banking and financial authorities and
market participants (investors and credit applicants) use
them better, and to a greater extent
by Roberto RUOZI
Professor Emeritus
UNIVERSITÀ BOCCONI DI MILANO
C
rowdfunding is evolving in the world,
in four basic forms: donations,
rewards, equity or investment and
lending. The latter seems destined to be the
most successful, as per the most recent data,
which show that in the region including
the United States, China and Europe, it
increased from USD 5 billion in 2012 to
USD 111 billion, in June 2015. Only in
the United Kingdom, the country with the
world’s highest ratio between social loans
and number of inhabitants, such loans
increased from GBP 189 million in 2012
to GBP 1,296 million, in 2014. The related
activity is defined by the European Banking
Authority (EBA) as: “Open calls to the wider
public by fund seekers through a third party,
typically an on-line platform, to raise funds
for a project or for personal purposes, in the
form of a loan agreement, with a promise
to repay with (or in certain cases without)
interest. The fund raisers may include
individuals, start-up companies or existing
SMEs, that are seeking an alternative means
of funding, rather the traditional credit
market”.
Essentially, in most cases, a specific
fundraising platform collects funds in the
market, which are deposited to a custodian
bank, where they remain separated both
from the assets of the platform and from
those of other lenders or borrowers. The
platform managers facilitate the meeting of
demand and supply of funds, evaluate the
creditworthiness of the credit applicants
and ensure the collection of debts when due.
For this service they receive commissions.
The conditions, under which the loans are
granted, differ according to the relative
In any case, the P2P lending
crowdfunding seems destined
to develop further, especially in
countries whose economic and
social development requires
sources of finance increasingly
more efficient, effective,
abundant and diversified, in
order to balance the behavior of
classic intermediaries, oriented
to the reduction of financial
support to the economy.
risk, calculated using on special scoring
programs. The remunerations of investors,
who are in direct relationship with the
debtors, are generally very interesting and
superior to those of many other traditional
forms of savings investment. As an example,
I recall that interest rate on such investments
in Italy oscillates today between 4 and 7%
when the banks’ savings are remunerated at
rates close to zero.
There are different main reasons for the
success of the P2P (Peer-to-Peer) lending
crowdfunding. The first one concerns
some changes in society, such as the desire
to communicate and to act, even in the
financial domain, more directly with the
counterparty, without the intervention of
intermediaries. This desire sharpened due
to the progressive loss of confidence that
the public, especially the younger one, has
shown regarding some classic types of
financial intermediaries. The same desire
is also the origin of the resounding success
of social networks, but also of the online
selling and buying of products and services,
and above all, of some financial activities,
such as virtual currencies (like Bitcoin).
The second reason concerns the
exceptional development of equipments of
information and communication technology,
particularly personal computers, mobile
phones and smartphones, and also to the
expansion of the so-called sharing economy,
www.aab.al
Bankieri
23
where do the P2P belong.
The expansion of the latter has also been
facilitated by the behaviour of banks that
have reduced the propensity for granting
loans, as well as by the direct intervention of
the banks themselves, which have found in
the financing of platforms a new asset class,
that allows them to diversify investments
without major organizational efforts. The
volume of funds invested in the platforms
by banks and institutional investors has in
fact boomed in the last two years.
So far the P2P (also called Personto-Person) lending has regarded almost
exclusively the lending to households, but
it is increasingly of interest also to SMEs,
giving rise to the P2B (Person-to-Business)
which becomes B2B when the funder and
the funded are enterprises (banking or nonbanking). The only difficulty of the real
24
Bankieri
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development of P2B, whose size though has
already exceeded that of classic P2P in the
United Kingdom, consists in the difficulty
of obtaining reliable, accurate and timely
data on the economic, financial and equity
situation of SMEs. This hinders the use of
automated techniques for the assessment
of their creditworthiness based on scoring
and, consequently, the determination of
the required rating for the definition of the
contractual conditions of the loans.
The financing of the platforms is however
not suitable for all the savers/investors, since
it has a medium/high risk, which should be
managed with a solid financial culture. The
international experience shows, however,
that the assessments of creditworthiness
made by the platforms are having very good
results. For example, I would note that, in
fact, the default rate on loans granted by the
platforms in Italy is less than 3%, while that
of personal loans at a national level is more
than 7%.
In any case, the P2P lending
crowdfunding seems destined to develop
further, especially in countries whose
economic and social development requires
sources of finance increasingly more
efficient, effective, abundant and diversified,
in order to balance the behavior of classic
intermediaries, oriented to the reduction of
financial support to the economy. Therefore,
it is essential to find and strengthen new
sources and new types of lending. In
this sense, the P2P and P2B lending may
represent one of the solutions and it is
therefore necessary that both banking and
financial authorities and market participants
(investors and credit applicants) use them
better, and to a greater extent.
Experts' Forum
EBTN's Triple E Standard
for quality in professional
qualifications
The vision of EBTN is to become the standard-setting
organization for the accreditation of qualifications in
the sector and, to this end, it created in 2015 the Triple
E Standard as a proposal aspiring to contribute to the
comparability of qualifications and the mobility of their
holders across Europe
by Alexandra MANIATI
Director of Hellenic Banking Institute,
Hellenic Bank Association Secretary
of Executive Committee & Member of
Board of Directors of EBTN
T
he financial services sector as
a rapidly evolving, knowledgeintensive industry characterized
by continuous developments, mainly in
regulation and technology, invests heavily
in continuous personnel training. On
the other hand, outsourced non-formal1
education is offered by numerous providers,
local and foreign, using various methods
that range from traditional in-class training
to innovative technology-enabled learning,
leading to all kinds of qualifications2.
Human Resources & Training professionals
dealing with recruitment, design of career
paths and proposal of training solutions
for compliance and business objectives,
and sector employees seeking to build their
personal qualifications portfolio come
across a large variety of qualifications
and providers. The task of making the
right decision by de-coding what each
qualification actually represents, in terms
of knowledge, skills and competences
of the holder, as well as the status of the
issuer, and comparing it to others can be
extremely challenging.
Since 2002, when the Copenhagen
Process was launched in the EU, aiming
to improve the performance, quality and
attractiveness of vocational education and
training in Europe, a huge effort has been
under way to build a common European
"language" in professional education.
EBTN's Triple E Standard aspires to
contribute to this effort, so that when
one comes across a Triple E accredited
certificate they can easily understand the
value it represents.
The European Banking & Financial
Services Training Association (EBTN) is
the united voice of providers of education
and training, in the banking and finance
sector. Through its 24 members and 16
associates – the Albanian Association of
Banks included - it represents the interests
of leading banking institutes from Europe
and beyond. The vision of EBTN is to
become the standard-setting organization
for the accreditation of qualifications in
the sector and, to this end, it created in
2015 the Triple E Standard as a proposal
aspiring to contribute to the comparability
of qualifications and the mobility of
their holders across Europe. The Triple
E Standard is the outcome of a twoyear project, co-funded by the European
Commission. It is a quality standard
for qualifications in the banking sector,
developed through a broad consultative
process with over 350 stakeholders from
the European financial industry. EBTN
was the leader of the Consortium and the
Hellenic Banking Institute (HBI) of the
Hellenic Bank Association was one of the
eight partners3.
"Triple E" refers to the three EU lifelong
learning instruments - recommendations
of the European Parliament and of the
Council - the principles of which it
According to CEDEFOP's Terminology of European Education and Training Policy, second edition (2014) "non-formal learning" signifies "learning embedded in
planned activities not explicitly designated as learning in terms of learning objectives, learning time or learning support. Non-formal learning is intentional from
the learner's point of view". Vocational education and training provided by banking institutes, other VET providers and banks' training departments fall under
this category.
2
According to CEDEFOP (2014) "qualification" signifies, among others, "the formal outcome (certificate, diploma or title) of an assessment process which is
obtained when a competent body determines that an individual has achieved learning outcomes to given standards and/or possesses the necessary competence to
do a job in a specific area of work."
3
For details regarding the Triple E Consortium: http://www.ebtn-triple-e.eu/
1
www.aab.al
Bankieri
25
E ke planifikuar
jetën në pension
?
!
I
N
A
T
O
L
L
I
F
GËZO NJË PENSION TË LUMTUR
Sigurimi i jetës në pension,
është një kulturë suksesi
Pavarësisht nga profesioni që keni, të gjithë ju kërkoni siguri për të
ardhmen. Një element kyç i jetës tuaj, do të jetë pensioni që përfitoni.
Në Credins bank, ne ju ofrojmë mundësinë të filloni investimin tuaj në
fondin vullnetar të pensionit përmes Sicred Pension.
Na kontaktoni në një nga 56 degët tona për të mësuar më shumë.
26
Bankieri
www.aab.al
info@bankacredins.com
embodies: the European Qualifications
Framework (EQF), the European Credit
system for Vocational Education and
Training (ECVET) and the European
Quality Assurance Reference Framework
for Vocational Education and Training
(EQAVET). The Standard specifies how
a non-formal qualification should be
designed and executed. It does not deal
with the technical content of a qualification
and therefore it is not a certification tool for
individuals; it is an accreditation proposal
for institutions seeking recognition of the
quality of qualifications they provide.
In short, the Standard (figure 1)
consists of three pillars, which provide the
outline of what is required from Triple E
qualifications: the central (blue) pillar
shows the Features characterizing a Triple
E qualification, while the other two pillars
include the tools and processes to be carried
out, in order to fulfill the Features.
The requirements depicted in the red
and green pillars are further elaborated and
explained by the Triple E Guidelines that
complement the Standard and define how
these are to be implemented in the design
and execution of Triple E qualifications.
In addition to this framework, EBTN
has created an accreditation process and
installed an independent committee for
the reviewing of applications. The first
for the banking sector,
ensuring that the
training it provides
matches the actual
needs of the market.
The assessment of
learning
outcomes
has been an important
consideration
ever
since 2006, when HBI
introduced the EFCB
program in Greece, a
120-hour training on
foundation banking
studies, leading to
the acquisition of
EBTN's
European
F o u n d a t i o n
Certificate
in
Banking. In the same
year, the HBI designed
and started offering
the 62-hour program:
"The
Compliance
Function in Banks",
which runs to this
day, having attracted
the
majority
of
compliance officers
in Greek banks. Both programs end with
an assessment in the form of written
exam. Moreover, HBI experts work with
applications are expected before the end of
the first semester 20164.
The main task of HBI, the vocational
education and training arm of the Hellenic
Bank Association, is to design and
implement professional training programs
the Training and HR Divisions of banks
to develop tailor-made courses for incompany training and certification in topics
such as Financing Small and Medium-Sized
Enterprises.
In the process of designing, imple-
4
5
6
menting and reviewing the abovementioned qualifications and in order
to ensure the quality of its services, the
HBI monitors and adopts European best
practices. For us the Triple E Standard
and the criteria it sets for a qualification,
such as the clear description of its learning
outcomes, the objectivity of the assessment
leading to its acquisition, the obligation
to regularly review its content and the
mandatory CPD5 activities required of
Triple E qualification holders in order to
keep their knowledge and skills updated
and thus maintain their title, are essential
in upgrading the quality and promoting
the comparability of qualifications. We
have already embedded most of the Triple
E provisions in our operation and we are
working towards our re-accreditation for
EBTN's completely revised Triple E EFCB6.
In order for the Triple E proposal to
work as expected the key challenge is its
adoption in the largest scale possible by
training providers throughout Europe. I
hope that the following figure gives all
interested parties good reason for this.
For details concerning the Triple E Standard and the related accreditation process: http://www.triple-e-ebtn.eu/
Continuous Professional Development.
All European institutes that were accredited to provide EFCB have to undergo a process of re-accreditation for the new Triple E EFCB.
www.aab.al
Bankieri
27
Experts' Forum
Success in retail banking:
A jigsaw beyond loyalty
Although nowadays the bank branch remains the main
contact and access platform for customers, it has
already lost its exclusive role as the sole service provider,
while it is losing ground, in terms of direct sales
by Redi MËRTIRI
Head of Retail Department
UNION BANK
B
anks, in the course of their activity,
have clear and similar objectives and
expectations, which have not really
changed for a long time, where some aim
at achieving a certain and constant profit
level, or expanding their market share,
whereas most of them aim at achieving a
combination of both approaches. It can
be said that the majority of businesses
today have similar objectives, as it was
used to be in the past. On the other
hand, individuals have a variety of needs
and expectations, so the segmentation
according to customers’ categories, thus
providing products and services which
satisfy their expectations, remains a
continuous challenge. The situation
seems even to be more complicated while
considering that current models must
be frequently modified, urged by the
rapid changes affecting the society, in a
time when individuals are asking more
28
Bankieri
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personally-tailored banking products,
offered at very high standards within a
very short time span. The bank customer
today is very well informed and shows
different behaviors, compared with the
one of few years ago. All of this is linked
with the level of communication.
It happens randomly that most of us
would worry much about not having the
mobile phone with us, rather than the
portfolio, thus evidencing the importance
of communication and facilities linked
with it, compared with possessing bank
cards or cash, at least in the short term.
The development of communication
channels that suits the customer’s
behavior without losing key elements
of banking business, is undoubtedly the
most important challenge of the banking
sector, which will remain as such, even
in the future. Although nowadays the
bank branch remains the main contact
and access platform for customers, it has
already lost its exclusive role as the sole
service provider, while it is losing ground,
in terms of direct sales. Thus, some new
channels, named “call centers”, which
offer specialized trainings, are equally
effective in sales, having at the same
time the advantage of reducing costs and
processing time for banks and customers,
as well.
When it comes to Albania, as in
all other countries, it is experiencing
high rates of development in the
communication and technology sector
and, which are unavoidably reflected at
banking industry. However, the pace of
development has not been the same, as
in other areas of the economy. If 10 years
ago the banking industry in general, and
Banks must seek and expand
cooperation with other business
sectors, in order to have a
simplified sales process and
to realize maximum profits.
Cooperation, especially in terms
of reducing costs and increasing
sales, can and should be done
between banks, which are
certainly in competition, but not
rival to each other.
retail banking in particular, were amongst
the most developed sectors in Albania and
comparable in infrastructure with that
of western countries, it has already lost
the first place. Nowdays, there are many
companies which provide services based
upon the latest technology and efficient
structures’ models, by offering advantages
for customers and, therefore, satisfactory
profits for themselves. To some extent,
it can be said that there is a justification
for Albanian banks, which have been
long launched mobile and online banking
services for their customers, mostly
free of charge, or at reduced prices.
Notwithstanding the increasing trends,
the level of use is still far away from
other countries in the region. Currently,
Albanian customers cannot be defined as
low internet, or social channels user, but it
seems that they have not fully embraced
and make use of remote electronic
payments. Based on this phenomenon,
there is a dilemma on banks, which invest
in relatively high-end electronic platforms,
which still do not justify their direct costs
of investments.
Another phenomenon that has
affected the way of doing banking
business in the country, during recent
years, is the relatively obvious intervention
of regulatory and legislative bodies into
the banking sector. The list of banks’ daily
activities has seen new entry tasks, like:
transparency strengthening, consumer
protection, suspicious activity reporting,
etc. Despite the difficulty of adapting to
ever-changing regulations and increasing
efforts to comply with them, it can be
said that banking sector has responded
efficiently to all these changes. Thus, banks
are now more transparent with customers,
by offering them high quality services,
and at the same time, using positively
the legal framework to bring into banks
more individuals with various financial
needs. However, the legal changes, on the
other hand, have been associated with an
increase in the level of information, which
has contributed to a reduction in the
number of loyal customers, at a particular
bank. Albanian bank customers do not
follow the bank with which they maintain
their main relationship, rather than the
product which meets better his demands.
As another positive development,
which serves to small customers in the
country, is the refocusing of banks’
attention toward the individual, as a
direct consequence of lending crisis and
decline of businesses’ share in total sales
and profit. Banks now promote more
retail products, which meet the needs
and suit more and more to different
categories of individuals. From consumer
perspective, the Albanian banks may be
moving in the right direction, but the pace
of development must be higher. This is
because:
• In terms online services, it is
inevitable that the Albanian customer will
follow trends of other countries and the
low use of electronic banking channels can
only be a result of feeble advertisement
and insufficient promotional campaign.
Promotion and boosting of online services,
which have been implemented by several
banks, must be accompanied in parallel
with simplified operational processes
and procedures. In this way, systems and
technology will serve the individuals and
not the opposite. The benefits of reduced
costs, as a result of online payments
and services, mean more free time for
employees, and therefore, a better focus of
branches on sales processes and services
to customers.
• Specialization plays an instrumental
role, in such a fragmented sector. Although
products seem to be almost similar,
customers and their needs are different,
from one bank to another. In this way,
it may be more efficient focusing not on
the whole customer segment, but only on
some categories, which are served with the
best products and from which maximum
benefits can be obtained.
• An important aspect to remember
is that the provision of banking services
is a very small part of total household
needs. Consequently, banks must seek and
expand cooperation with other business
sectors, in order to have a simplified
sales process and to realize maximum
profits. Cooperation, especially in terms
of reducing costs and increasing sales, can
and should be done between banks, which
are certainly in competition, but not rival
to each other.
Despite economy’s ups and downs,
individuals should always be in the focus
of banking sector, because it guarantees,
more than any other category, a constant
and long-term profit.
www.aab.al
Bankieri
29
Economist Corner
The profile and features of
economic growth in Albania,
1992-2015
Economic growth has been largely based on
consumption, remittances and imports, and not on
production, investments and exports ... it has been
more of an extensive quantitative nature rather than
a qualitative economic growth, stemming from high
efficiency, technology innovation & modern sectors and
activities.
by Prof. Dr. Adrian CIVICI
President,
EUROPEAN UNIVERSITY OF TIRANA, UET
E
conomic growth is the keyword
for the health of any economy,
opportunities for stable finances,
employment
opportunities
and
unemployment reduction, consumption
growth opportunities, policies for
sustainable development, etc. Key
international institutions such as: the
IMF or World Bank, or any government
in any country, confronts the pride of its
success, or dealing with criticism, with
the figures of economic growth that it
accomplishes. Gross Domestic Product
(GDP) serves as a benchmark to calculate
public debt, budget deficit, public
investments, foreign direct investments,
fiscal burden, etc. French economist, Mr.
Comeliau writes: "Are you a politician
of a poor country? Just make efforts to
increase national incomes. Your country
is drowned in domestic and foreign
debts? You cannot meet your obligations,
30
Bankieri
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and reduce them without adding up the
economic growth.... Your country suffers
from economic, social and territorial
inequalities? Then try enlarging the
"cake" size to be distributed, thus add up
the economic growth to have more money
available. Public budget is never sufficient
to satisfy the requirements and objectives?
Just improve fiscal policy and increase the
opportunities for manufacturing activities
in all sectors of the economy. Shareholders
of companies declare increased profits?
Then try adding up the production and
sales volume. Looking for a job and being
unable to find one? Seeking higher wages
and greater consumption opportunities?
Be patient, businesses are waiting for the
economic conjuncture and the economic
growth rate to be improved, in order to
meet these requirements.
Naturally, when it comes to economic
growth we have to consider numerous
debates and discussions of economic,
financial and social nature, that do not
fetish or consider it as a magic stick
that would solve everything, but instead
recommending that its analyses and
assessments must be always accompanied
with questions the conclusions, like:
to what extent the economic growth is
transformed into economic and social
development? Is it "translated", and how,
into prosperity and progress? Does this
mean a quantitative or qualitative growth?
How does the economic growth impact
the sustainable development? What is the
relation between economic growth and
financial and banking stability? Are we
witnessing a "friendly" economic growth,
or an "aggressive - destructive" one for
the environment? How satisfied the public
feels with such economic growth and its
respective effects on everyday life? In this
The economic growth and
fiscal sustainability vastly
depends on public investment
implementation and bank credit.
Over 85% of financing of the
economy and consumption
comes directly from the banking
system, while in developed
countries such indicator is
nearly inverted, in favor of
the financial markets, stock
exchanges, investment funds,
private sector industry, or
services, etc.
view, the economic growth is regarded as
a "thermometer" or "litmus", which on
one hand reflects and witness the state of
the economy and financial system, whose
efficiency and capacity are reflected in the
economic growth rate, and on the other
hand, it reflects practical opportunities
and results for accomplishing a series of
economic, financial and social policies,
which are substantially dependent
on incomes, produced exactly out of
economic growth. In this sense, "the
portrayal of economic growth", "its
major features" confront us clearly
with the responsibility for building a
sustainable, well & efficiently - structured
economy, capable to weather crises, or
hardships, arising from business cycles
and major structural reforms, as well
with responsibilities for social policy,
sustainable development, etc.
By synthesizing several essential
components of economic growth in
Albania during the last 25 years of
transition, we may depict some key
features that characterize it, and in this
way, analyze the key factors leading to a
stabilization of the sustainable growth,
as well as identifying the most important
courses of its funding and support, such
as:
Economic growth during these 25
years has been of an erratic nature, i.e. it
has experienced significant fluctuations
which have reflected the features of the
Albanian transition - starting from a
very low economic basis, continuous
political conflicts, serious social unrest in
1997 and 1998, the effect of structural
and transforming reforms, in the frame
of agreements with IMF and WB, from
1992 till now, favorable international or
regional and global economic situations,
ore the global financial crisis, the economic
situation of neighbors, such as: Greece and
Italy, etc. We have been growing at 5-6%
in 1994-96, scored a negative growth in
1997, it reached nearly 8% in 2008, to
follow dropping at 1.3% in 2012, whereas
during the last 2-3 years strenuous efforts
are made to target passing the 3% ceiling.
Even forecasts by the Ministry of Finance,
IMF, World Bank or EBRD, do not see any
surpassing of the 4-4.5% ceiling, at least
before 2018 - 2020. Such figures confirm
the fragility of GDP performance and its
high dependence on "external factors,
or extra - economic and financial ones",
in the sense of not closely related to the
economic structure and its efficiency, or
the effects of structural reforms.
Economic growth has not produced
the expected symmetric positive side
effects. In other words, it has not moved
in tandem with employment, thus being
away of "Okun’s Law", i.e. symmetric
relationship
between
employment
growth, and economic growth. Albania
is among the countries which prove
a weak cause-and-effect relationship
between economic growth and reduced
unemployment. Throughout many years
the unemployment has used immigration
in countries like: Greece, Italy, Germany,
etc., as a discharge valve. Economic growth
has produced disparities in regional,
territorial and social development.
However, it seems positively related
with the level of poverty. Studies show a
positive correlation between economic
growth and poverty reduction, thus a more
inclusive growth. For example, during
the period 2002-2008, when economic
growth moved from 4.2% to 7.5%, the
poverty fell from 25.4% to 12.5%, while
the 1.3% decline in 2012 led to relative
increase of poverty. Labor markets play a
limited role in poverty reduction, as only
50% of total household income comes
from labor wages. The labor market
continues to lack the optimal flexibility
and absorption ability, by reflecting
structural deficiencies of the national
economy. The economy evidences little
demand and quality jobs that require high
levels of training and education, whereas
thousands job vacancies, like "craftsmen"
who seek simply "vocational training",
are widely advertised. Another paradox
for the Albanian economy is the high rate
of "voluntary unemployment", which is
mostly a result of low salaries offered by
businesses, or various economic sectors,
which discourage jobless people to join
the labor market.
Economic growth has been largely
based on consumption, remittances
and imports, and not on production,
investments and exports ... it has been
more of an extensive quantitative nature
rather than a qualitative economic
growth, stemming from high efficiency,
technology innovation & modern sectors
and activities. For example, during the
period 2000-2008, total consumption
accounted for nearly 64% of aggregate
demand growth, while during the period
of the global financial crisis such figure
has been steadily shrinking. The economic
slowdown, which began after 2008,
caused a decline in labor demand, resulting
in a reduction of household income and
consumption. Meanwhile, if we analyze
the structure of creating new jobs in the
last 10-15 years, it results that the majority
of employment was in services industry
with low quality and standard, contract
manufacturing industry, call centers, etc.
When it comes to capital, or the amount
of investment needed to create a new job,
the figure comes up to the minimum of
EUR 3000 - 5000 per job, whereas the
efficient employment – which requires
well – prepared and efficient human
resources – stands between EUR 20.000
to 30.000 for a job, and such jobs are
naturally paid with much higher wages. As
the World Bank puts it, it is a fact that, in
Albania "productivity has a weak impact
on growth; total factor productivity, labor
and human capital, or capital stock per
work unit, has been decreasing, during
2000 – 2014.”
Economic growth continues to be
very sensitive to public investments and
loans from the banking sector - while
the opposite must have occurred; the
private sector and the financial market
need to originate the bulk of financing.
It is a fact that economic growth and
fiscal sustainability vastly depends on
public investment implementation and
bank credit. Over 85% of financing of
the economy and consumption comes
directly from the banking system, while
in developed countries such indicator is
nearly inverted, in favor of the financial
markets, stock exchanges, investment
funds, private sector industry, or services,
etc. Financial markets continue to be still
in their embryonic stage; even the access
to financial services continues to be low,
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Bankieri
31
compared to other regional countries, let
alone the EU countries. This is the best
explanation why the weak credit growth
or high figure of non-performing loans,
have a direct effect on the weak economic
growth rate.
Economic growth and its convergence
with regional and European economies.
When analyzing the structure of the
Albanian
economy,
its
efficiency,
competitiveness, wage levels, prices, etc.,
usually it is little associated with specific
policies that ensure convergence and
bring us closer to the region and EU.
Many economic, financial and social
indicators are lagging behind those of
the region and the European average.
We need a stable economic growth at
5-6%, in a way to shore up the possibility
of any approximation or convergence,
especially with the EU average. According
to calculations made by the World Bank,
it will take about 36 years for Albania,
with a growth rate of 4.5% to reach
the average income per capita of EU
countries, while a sustained 6% economic
growth, shorten it to 25 years. However,
referring to medium-term macroeconomic
projections, Albania plans that a 5 - 6%
economic growth may be realized after
the period of 2018-2020.
The economic growth has been
and remains the subject of numerous
hot debates and discussions in Albania.
Besides abuse, in the context of political
conflicts, which confronts the growth
figure, provided by INSTAT, with political
ire and chronic distrust for its authenticity,
it is also fueled by the fact that data
collection is difficult, in a time when we
cannot make real time corrections and
measurements, as a result of difficulties
in coordination among institutions,
in terms of transparency of public
and private finance ... taxes, treasury,
ministries, customs, INSTAT, BoA, banks,
etc. Naturally, such a reality hinders the
efficiency of public policies and decisionmaking in the private sector or FDIs.
Economic growth and new economic
model, or "the new economic modeling
which consists in the contribution of
various sectors to GDP". World Bank
opened this debate back in 2005, with a
study on factors impacting the sustainable
growth and development in Albania,
whereas we have spent a full 10-year period
by not giving a comprehensive answer
of a strategic nature, like: What are the
objectives and strategies for a structural
change in the contribution of economy’s
branches and sectors to GDP, for the next
10 or 15 years? How the "holes", caused
on the GDP performance and stability
by the construction sector, remittances’
reduction and limited possibilities of
privatization, will be replaced and filled
up? At what extent the economic growth
is dependent from structural changes
in our economy? Do we have already a
clear strategy of economic and financial
development for the next 20 years,
with clearly - defined priority branches
and sectors?, etc. As long as we remain
without a direct answer to such issues, it
will be difficult to feel fully confident that
our economic policies, business climate,
fiscal and budgetary policies, etc., will be
heading towards the right direction. The
most important point here remains the
prevalence of the philosophy, which seems
already understood, that growth should
be driven by investment and exports, and
not by consumption and imports.
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Social Capital
“Leader for a Day”
On 23 March, 2016, the bank joined the event
organized by Junior Achievement Albania (JA):
“Leader for a Day 2016”. Some 46 excellent
senior high school students & JA achievers
from schools around the country shadowed
46 high profile leaders of the business world
and diplomatic arena. The selected participants
were engaged on different work processes of a
leader and became aware of the expectations
and commitments of being leaders and decision
makers.
“Bonus” Reward Program with American
Express Cards of Alpha Bank
On 23 February, Alpha Bank - Albania organized an event, on the occasion of successful
issuance of the reward program: "Alpha Bank
Bonus". Through this program, all holders of
prestigious "American Express" card in Albania receive a refund for their purchases at "Carrefour" supermarket, "Fashion Group" shops
(Carpisa, Geox, Golden Lady, Golden Point,
Mango, Okaidi, Parfois, Prenatal and Springfield), "Gulf" gas stations, "Hygeia" Hospital
and "Neptun" shops’ network.
National Center for Blood Transfusion
BKT, in view of its mission to support health
institutions in order to improve conditions
and the services provided, had contributed
for the reconstruction of premises at the institution.
Hospital Centre “Dr. Sadik Dinçi” Elbasan
BKT, as part of the program to improve the
conditions of health institutions, has donated
medical equipment to the institution, in the
frame of providing quality services for patients
in Elbasan district and by increasing the range
of laboratory analyses, performed in the hospital’s laboratory.
- Helped in accelerating, facilitating and formalizing the Albanian businesses, by creating
a product dedicated to the purchase of Fiscal
memory devices.
- Supported "Studenti" Sport Club in volleyball
and football, by improving infrastructure and
sports facilities.
- Supported Public Centre for the Elderly in
Tirana, one of many state institutions that
provides care for the elderly. Other institutions
for vulnerable groups were supported, such as,
children without parental care, disabled persons and victims of violence and trafficking.
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- Supported the initiative undertaken by the
Tirana Municipality: "Adopt a kindergarten".
During the first 3 months of the year banks
contributed in some sectors:
- A responsible employer of equal opportunities in employment and career. During January - March 2016 the bank employed 30 new
employees.
American Investment Bank (ABI Bank)
launched its new corporate marketing campaign and video: "Invest in optimism! ... Gratitude and respect for our people and country."
This campaign puts optimism at its center,
which serves as a value and motivation promoting engine to realize any dream, effort and
new initiative, and it is fully compatible not
only with bank’s mission, but also with ABI
Bank’s newly launched slogan: "Invest in optimism". ABI Bank believes that the focus of all
stakeholders for developing important sectors
of the economy will have a long lasting positive
impact on the banking system and the economy, as a whole.
lic and supported the event organized at the
Palace of Brigades, to raise awareness for children and individuals with Down syndrome.
Joined the initiative: "Let’s make our city more
green." Credins Bank supported Tirana Municipality by planting 1000 Oleander plants
through the Ring axis.
- About 1,000 families in need in all Albanian
cities where Credins Bank branches are located,
received support with food products.
- Joined the initiative of President of the Repub-
In February 2016, International Commercial Bank received the Report: Green 2015:
"Caring for our common home", which
summarizes the activities of trash recycling,
implemented by the International Commercial Bank (ICB) in 2015, along with
Green Recycling company and its measures
their positive impact on environment. ICB
showed strong commitment to trash recycling and protecting the environment. The
findings suggest that the Bank's environmental policy is tightly embraced by its
employees.
Support program for stray dogs in Tirana
Employees of the International Commercial Bank contributed voluntarily, in March
2016, in support of the sterilization project
for stray dogs of the capital, a project undertaken for the first time by the Municipality,
in cooperation with the Agency of Consumer Protection and with a group veterinarian
(surgeons).
"Leader for a Day"
By supporting the Junior Achievement program, and the initiative: "Leader for a Day",
International Commercial Bank welcomed
on 23March 2016, Elsa Gjoci, an excellent student, from "Ibrahim Muça", High
School, Librazhd, assigned by the program
itself, to spend a full day working with Mr.
Akan Aydin, Head of SME & Corporate
Department. During the ceremony held by
JA, the bank received the award: "Junior
Achievement of Albania, Gratitude".
Social Capital
Bank employees volunteer teaching in
High schools the Junior Achievement
Business Modules
The bank, in cooperation with Junior
Achievement Albania, offered to its employees the opportunity to join teaching
for few subjects for 11th and 12th grade in
high schools, like: Ethics in Business, Abilities for Success, Become an Entrepreneur
and Students’ Societies. Some 16 volunteers
participated in this initiative.
Plastic Cap Collection
Intesa Sanpaolo Bank Albania is continuing,
during 2016, the great cooperation started
in 2014 with the Albanian Cap Project.
All colleagues, clients and stakeholders are
collecting plastic caps and with the money
earned from the recycling the NGO buys
wheel-chairs for the disabled people who
cannot afford buying them
“Leader for 1 Day”
On 23 March, Intesa Sanpaolo Bank Albania welcomed Sara Shameti, a student from
“Ismail Qemali” high-school. She followed,
for one full business day, the agenda of Head
of Human Resources Department in all
meetings, conferences and seminars, sharing personal experiences, academic background, career pursuits, major challenges
and lessons learned throughout the professional life, along with some of the highlights
and key successes in her career.
CSR Initiative Calendar of 2016 based in
the 17 UN Sustainable Development Goals
All colleagues are getting involved in creating and participating in initiatives and activities on voluntary base, during 2016, in
compliance with the 17 Objectives for the
Sustainable Development, defined by UN.
Aiming to raise awareness and make all of
us feel the importance of our daily support
for the achievement of these global goals,
a calendar of 2016 CSR activities is being
prepared and will be shared through internal communication channels.
President decorates Raiffeisen Bank Albania with the title: "For special civic merits"
His Excellency, Mr. Bujar Nishani, President
of the Republic, organized a gala evening
with representatives from business community in Albania, which was held at the Palace
of Brigades. Alongside other major companies, the President of the Republic awarded
Raiffeisen Bank the title: "For Special Civic
Merits", which was submitted to Mr. Christian Canacaris, Chief Executive Officer of
Raiffeisen Bank - Albania.
Raiffeisen Bank sponsored the event: "Protect your privacy during online navigation",
an initiative taken by the Commissioner for
Information Right and Data Protection, in
cooperation with the Ministry of Education
and Sports, which was held in the form of a
competition with painting and essays from
students of 9-year schools of all the country.
About 500 students brought their works,
where the best out of them were exhibited at
the Art Gallery during the event, which was
organized on this occasion.
Poverty does not have age
In cooperation with civil society, the project
focused on a list of 40 children, living in
difficult conditions in Sinjë area, of Berat.
The bank collected various gifts from staff
and individuals.
Continued support for SOS children's village
The Bank continues its commitment to
"adopt" three SOS children's village..
Supporting the State Police
The Bank supported the General Directorate
of State Police and the Police Academy, by
contributing with laptops and computers.
Union Bank Staff making charity
Bank staff distributed gifts to the care
center for adults: “We for you" and
"Barricades 2 + 3" kindergarten in Berat and Lezha, for the care center for
children and adults "Roses" and to
the kindergarten which supporting the
initiative: "Every Roma child in kindergarten".
Sponsorship for art
In the frame of sponsoring artistic activities in the country, Union Bank sponsored a photographic exhibition of Prof.
Adam Lazowski.
8 March at Union Bank
The 8 March day was celebrated with
flowers for clients at Union Bank
branches. A kind surprise was also flowers sent in some workplaces. This symbol
indicates the bank and its staff’s appreciation and strong relation created with
customers.
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SPECIALE
The
17
global goals
for Sustainable
Development
the commitment of Albania
by Bas BERENDS
I
n September last year, world leaders
got together in New York to adopt
the new Sustainable Development
Goals (SDGs), which are essentially an
agreed vision to put people and planet
on a sustainable path, by 2030. The
implementation of SDGs started on
1 January 2016, so now it is time for
everyone in Albania to commit themselves
to their achievement!
There is no doubt that in the future,
2015 will be seen as a defining year in time;
the 17 Sustainable Development Goals
were adopted, with inclusive development
and environmental protection at its core.
Furthermore, in November, we witnessed
a global willingness to seriously combat
climate change. At the COP21 meeting in
Paris, an agreement was reached to limit
the warming of our planet to less than 2
degrees, compared to pre-industrial levels.
This is essential if we want to make sure
that climate change does not irreversibly
change life on Earth. A third conference,
in Addis Ababa, focused on innovative
measures to finance the new development
agenda.
These three key meetings in New
York, Paris, and Addis, were all led by
the United Nations, in the year that it
celebrated its 70th anniversary. Together,
the Paris Agreement and the Agenda 2030
on sustainable development will form
Environment Advisor & SDG Focal Point,
Resident Coordinator’s Office, UNITED NATIONS - ALBANIA
the foundations of a new development
agenda that can put the world on a course
of action to end poverty, fight inequality
and injustice, and protect the planet.
It is important to underline that the
Sustainable Development Goals were
developed during a two-year global and
national inclusive consultative process,
including here in Albania. Many actors
had their say in the final definition of
the goals and the targets: governments,
the private sector, and civil society. In
Albania, the United Nations held inspiring
conversations with around nine thousand
people across the country, through
surveys called: “The Future We Want”,
“Voices from Albania” and “My World”.
We got a clear picture of the world
Albanian people want to live in, with
better job opportunities, better education,
and access to better and affordable health
care services. These stories fed into the
discussions about what the SDGs should
be about. People called for a stronger role
of public institutions for social protection
and delivery of basic social services.
This can be related to SDG 16 on strong
institutions and SDG 3 on good health
and well-being. The people that were
interviewed also wanted a coordinated
action between government and business
to create jobs through innovation and
partnerships. This feeds into SDG 8
on decent work, as well as SDG 9 on
innovation. Furthermore, respondents
called for natural resources management
and a transformation of consumption
patterns, which ties in, for example, with
A Middle-Income Country like
Albania needs to focus on
allowing people to exit poverty
through education and jobs, and
make sure people do not fall
back into poverty by providing
social protection and financial
assets. Here, the private sector,
including the banking sector,
could be involved.
SDG 15 life on land and SDG 12 on
responsible consumption and production.
The Sustainable Development Goals
by the way are not totally new. Millions of
people’s lives have improved, due to efforts
to achieve the Millennium Development
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37
Goals (MDGs), the first set of goals that
were established for the period between
2000 and 2015. At a global level, MDGs
targets have been met on reducing poverty,
increasing access to improved drinking
water sources, improving the lives of
slum dwellers and achieving gender
parity in primary schools. In Albania,
great progress has been made in the area
of child and maternal mortality, whereas
we have seen mixed results in the area of
education and environmental protection.
Over the past 20 years, the likelihood
of a child dying before age five has been
nearly cut in half. Globally, the maternal
mortality ratio dropped by nearly
half. Enormous steps have been made,
showing the value of a unifying agenda
underpinned by goals and targets. Yet,
despite this progress, the indignity of
poverty has not been ended for all. This
is also the case in Albania, where poverty
levels initially declined but have recently
been on the up again; the same holds true
for unemployment.
The MDG experience proves that
setting goals and targets works, and the
UN’s work in Albania has been guided by
these. To name but a few examples: we
have helped the government implement
the Territorial and Administrative
Reform. Together with government, civil
society and the business community, UN
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Agencies have put gender equality, as well
as violence against women, high on the
agenda. The socio-economic situation of
the Roma and Egyptian communities has
improved also thanks to UN support. We
have contributed to progressive health
policies and reforms. UN support has
enhanced the employability of youth and
vulnerable groups. And we are assisting in
unlocking the potential that Albania has
when it comes to energy efficiency and
renewable energy, in order to fight against
climate change.
The SDGs are supposed to tackle any
of the unfinished business of the MDGS,
as well as focus on new targets that have
to do with inequality and sustainability.
One of the main challenges for Albania
lies in the area of governance, and it is
courageous that the Albanian government
has signed up for a special SDG pilot on
governance issues, which will focus on
a wide ranging set of indicators, related
to judicial and police performance,
transparency of public expenditure, access
to water and youth employment.
The 2030 Agenda for Sustainable
Development has now arrived at the
implementation stage, and it is up to many
actors in society to play a role in making
sure that the global goals do not just remain
an empty piece of paper. Governments
around the world, including the Albanian
one, may have signed the documents,
but they need their citizens, businesses,
academia and other professionals to help
put them into practice. This would include
new partnerships, for example, with the
financial sector, to fund initiatives. You
could think of special loans for renewable
energy, or energy efficiency measures,
micro-credits for farmers to implement
climate resilient agriculture, but also
more internship for young people that
are looking for a job. A Middle-Income
Country like Albania needs to focus on
allowing people to exit poverty through
education and jobs, and make sure people
do not fall back into poverty by providing
social protection and financial assets.
Here, the private sector, including the
banking sector, could be involved.
The Global Goals help us focus on
our shared challenges. With these new,
interconnected Sustainable Development
Goals that apply to all, we can go much
further to end all forms of poverty, ensure
no one is left behind, tackle unsustainable
practices and chart a dignified future
for all people in all countries. Success
in this new ambitious agenda for global
action will be driven by leaders within
government, business and civil society,
especially at the local levels. The UN in
Albania stands ready to team up with all
our partners to make the SDGs a reality.
Auditori Financiar
Syndicated Lending
A simple explanation of
complex loans
By inviting banks to participate, the seniors can avoid
excessive exposure to a single borrower, while still
earning a fee for their origination expertise, including
contract design, pricing and distribution services. So,
loan syndication is a way for the bank to solve an inherent
tension between the benefits of specialization and the
benefits of diversification
by Sonila TAÇI, MBA, MA
Head of Financial Statistics Sector,
Statistics Department,
BANK OF ALBANIA
A
syndicated loan is a credit granted
by a group of lenders, typically
banks, but only, to a borrower.
Every lender has a separate claim on the
borrower, even though there is a single
loan agreement. In this case, there is
typically an originating bank (or group
of originating banks) that conducts the
credit analysis, prior to granting the loan
and also negotiates the pricing structure
of the loan. These originating banks,
called the senior syndicate members, are
appointed by the borrower and provide
the key financial intermediation services
of resolving pre-contract informational
asymmetries and designing the loan
contract. The other members in the
syndicate, called the junior banks/
members, provide a portion of the
funding. The numbers and identities of
the juniors vary depending on the size,
complexity and pricing of the loan, as
well as the borrower’s willingness to
expand its banking relationships.
Why syndicated lending is important
and applicable? One of the main reasons
is the need for the senior lenders to
diversify their credit risk exposure. By
Syndicated lending has been
very popular in United States
domestic lending for many
decades. However, since the
1970s, the practice has become
an important part of the
international lending, as well. In
the international market, loan
syndications first developed as
a sovereign lending business.
A revival of syndicated lending
occurred in the early 1990s,
and now syndicated lending has
become the biggest corporate
finance market in the United
States and in key world’s biggest
economies, as well as the
largest source of underwriting
revenue for lenders.
inviting banks to participate, the seniors
can avoid excessive exposure to a single
borrower, while still earning a fee for
their origination expertise, including
contract design, pricing and distribution
services. That is, loan syndication is a way
for the bank to solve an inherent tension
between the benefits of specialization and
the benefits of diversification.
For the junior lenders in the syndicate,
syndication enables participation without
the costs of origination expertise. That
is, these banks can diversify their loan
portfolio by adding credits that they lack
the expertise to originate themselves.
Moreover, it exposes the junior bank to
the borrower, and therefore creates the
possibility of a future relationship that is
deeper and more profitable for the bank.
An example of a syndicated loan structure
is provided in the figure below.
The Market for Syndicated Loans
Syndicated lending has been very popular
in United States domestic lending for
many decades. However, since the 1970s,
the practice has become an important part
of the international lending, as well. In the
international market, loan syndications
first developed as a sovereign lending
business. In fact, just prior to the sovereign
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39
GRUA SIPERMARRESE?
ME NJE MIKE PERKRAH
JE GRUA E SUKSESSHME
MENDUAR SI PER VETE
FINANCIM & KESHILLIM
MBESHTETJE FINANCIARE NEPERMJET KREDIVE TE DIZENJUARA PER JU, NORMA TE ULTA INTERESI
PERIUDHE “GRACE“ – PAGUAJ VETEM INTERESA
RIMBURSIM I PJESHEM I INTERESIT - BONUS PER PAGUESIT E RREGULLT TE KREDISE
MUNDESI PER TE SPOSTUAR RIPAGIMIN E KREDISE DERI NE 6 KESTE MUJORE NE RASTE SHTATEZANIE
KESHILLIM NGA EKSPERTET E BERZH-it & PLATFORMA ORJENTUESE “BUSINESS LENS” - FALAS
PAKETA PRODUKTESH & SHERBIMESH TE DEDIKUARA PER JU
SYNDICATE
- Organizes and structures the syndicate,
- Negotiates terms, originates the loan
and carries all administrative procedures
CLIENT
- Invites participants,
- Negotiates participation terms,
- Discloses Information
ARRANGER
&
BOOKRUNNER
- Provides funds
BANK 1
BANK 2
BANK 3
default by Mexico in 1982, most of the
developing countries’ debt consisted
of syndicated loans. The repayment
difficulties experienced by Mexico and
other sovereign borrowers in the 1980s
resulted in the restructuring of Mexican
debt into Brady bonds in 1989. As a
consequence, emerging-market borrowers
gravitated toward bond financing, causing
a shrinkage in the syndicated lending. A
revival of syndicated lending occurred
in the early 1990s, and now syndicated
lending has become the biggest corporate
finance market in the United States and in
key world’s biggest economies, as well as
the largest source of underwriting revenue
for lenders.
What Is a Loan Sale?
A loan sale is similar to a syndicated
loan in that the originating bank is able
to ensure that part of the funding for the
loan comes from other lenders. There are
two kinds of commercial loan sales: loan
strips and loan participations.
A loan strip is a short-term share of a
long-term loan. When the strip comes
due at the end of a given period (for
example: 5, 30 or 60 days), the selling
bank must repay the strip holder the
contractual amount. In essence, funding
has dried up for the loan at that point
in time. Typically, it resembles somehow
to repurchase agreements (REPO). To
continue funding the loan, the origination
bank must resell the strip for another
period of providing funding itself. A loan
sale without recourse removes the loan
from the seller’s books and thus does
not require reserves or capital to be held
against it. The issue is less transparent
for strips since they expose the bank to
refunding risk. In January 1988, FASB
determined that loan strips could be
recorded as sales if: (i) the buyer of the
1
strip assumes the full risk of loss, and (ii)
the lender has no contractual obligation
to repurchase the loan strip.
Loan Participation
Like syndicated lending, loan participation
is a multi-lender financing arrangement. It
differs from a loan strip in that it is an
outright sale of a loan. Participations
are loans where the lead lender (‘‘Lead’’)
sells a participation in a loan to one or
more participation lenders. The Lead
continues to manage the loan on behalf of
the participants. The relationship among
the lenders is typically formalized in a
participation agreement, which stipulates
that the participant receives an undivided
interest in the loan. The sale of the loan
to participants typically occurs after the
loan documentation has been executed
by the Lead and the borrower. Unlike a
syndicated loan, the participants do not
contract directly with the borrower. The
Lead negotiates the loan terms with the
borrower, receives all the payments from
the borrower and collateral is maintained
by the Lead in its own name. Participants
make advances to the Lead, and these take
the form of purchases of participation
interests.
The advantage of a participant rather
than being a junior lender in a syndicated
loan is that the lender does not need a
separate contract with the borrower and
can deal solely with the Lead. Thus, the
loan participation is very much like a
pure transaction loan or capital market
investment. The advantages of being a
junior lender in a syndicate rather than
a participant are twofold. One is that
the junior lender does not have to worry
about the additional risk that the Lead
may become insolvent. The other is
that the junior lender in a syndicate can
hope to develop a relationship with the
borrower, something that is less likely
for a participant. From the standpoint
of the Lead, one advantage of the loan
participation, relative to a syndicated one,
is that it retains exclusive control over its
relationship with the borrower and does
not invite potential future competition
for relationship lending from the junior
lender in the syndicate. The advantage
of a syndicated loan for the senior lender
is that, because the juniors have direct
relationships with the borrowers, the
senior lender can free up its own capital
in an amount of credit extended by the
junior lenders.
Choosing between Loan Syndication and
Loan Sales
The syndicated loan market and the
market for loan participations have
developed because they offer distinct
economic advantages for borrowers
as well as lenders. For the borrowers,
syndicated and participation loans offer
some of the advantages of relationship
borrowing, along with some of the
advantages of transaction borrowing
(such as liquidity and hence a lower
borrowing cost). For the senior lenders,
loan syndication permits exploitation of
their origination expertise in resolving
pre-contract informational asymmetries
and negotiating pricing terms, while also
enabling them to diversify their credit risk
exposure. The same is true for the Lead
in a participation loan. For junior lenders,
the benefits of loan syndication are the
ability to diversify into sectors in which
they lack origination expertise and to
possibly develop a relationship with the
borrower that could be deepened in the
future. For participants, the benefit of loan
participation is the ability to diversify into
credits where they lack relationship and/
or origination expertise.
Financial Accounting Standards Board.
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AAB Trainings
Project Management Advanced Level
25 - 29 January
Emotional Intelligence
15-16 March 2016
Supporting Employees
through Organizational
Change in the Banking Sector
26 January
Win-Win Negotiation
10-11 March 2016
Fraud Detection and
Prevention 8 - 9 February
Manage your energy not your time
17-18 March 2016
Regional Seminar on better
implementation of AML
regulatory framework
16 February
Customer Relationship Banking
23-24 March 2016
Retail Banking and New
Distribution Channels
24 – 26 February
Bank Liquidity Risk Management
in the Basel III & Capital
Requirements Directive IV (CRD4)
Framework, 25 March 2016
AAB Activities
20
16
Activity with media representatives 14 January
Banks – Businesses meeting - 3 March
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