Licensing and regulatory framework During 2004 the banking system in Albania was characterized by dynamic developments, either in terms of increasing the number of banks operating in the market or in terms of extending the banking network in various areas of the country. At end of 2004 the number of banks in Albania was 16, from which 2 banks are totally with domestic capital and 14 other banks have foreign capital. On April 2004 the banking system was further consolidated with the approval on the ownership transfer of 100 percent of the Savings Banks’ stock to Raiffeisen Zentralbank, as a crowning of the privatization process of this bank. Also, the Popular Bank Jnt. Stk., the second bank with totally Albanian capital entered into Albanian market. An application for establishing a new bank with wholly Albanian capital was also submitted. This application has recently received the preliminary approval for licence, pursuant to requirements of the Law “On Banking System in the Republic of Albania”. Parallel to development and extension of the banking system and the products it offers, further improvements and amendments have taken place in the regulatory packet of banking supervision. During 2004, the Guideline “On bank regulatory capital, the Regulation “On capital adequacy”, the Regulation “On credit risk management” were revised, and the Regulation “On money laundering prevention” was adopted. Also, during 2004 work was done for making improvements in the existing Law “On Banking System in the Republic of Albania”, with the goal to realize its adoption by the Albanian Parliament within 2005.
In absolute value, the total foreign assets were raised by Lek 17.2 billion. Contribution to foreign assets growth was also given by foreign reserve investment in foreign markets. However, the appreciation of domestic currency versus two main currencies, Euro and US dollar, has negatively impacted on existing foreign assets value by about Lek 8.5 billion, expressed in the reduction of Revaluation Reserve, on which the Ministry of Finance has projected the issuing of securities, in compliance with the Law “On the Bank of Albania” and the Law “On State Budget for 2005”. Also, the Bank of Albania, in implementation of its monetary policy, has used the instrument of outright Treasury bills sales. This has brought about the reduction of portfolio of domestic assets of the Bank of Albania by 10.5 percent or Lek 8.0 billion. On the other hand, the easing policy has impacted on the decrease of Treasury bills yield through interest rate cut. The combination of both factors has impacted on the level of income from investment in securities portfolio of Albanian Government for Lek 2.3 billion or 30 percent less in comparison to the plan. This reduction constitutes 100 percent of the dropping of total income from operations. Under the conditions of almost the same level of operative expenses, compared to the previous year, the net profit of the Bank of Albania over 2004 resulted to Lek 5.5 billion or Lek 2.4 billion less than in 2003. ******* Honored deputies!