During 2004 the banking system assets were raised by Lek 52.8 billion (or 14.1 percent), about Lek 18.5 billion more than the growth of assets evidenced over 2003. Year 2004 underwent a significant rise in lending activity, with a growth rate of 38 percent (or Lek 19.3 billion) at end of 2004, compared to 30.5 percent at end of 2003. Therefore, lending rose to 16.4 percent of total assets of the system at end of 2004, from 13.5 percent in the same period of 2003. Lending quality indicator (problem loans to credit balance ratio) is estimated at 4.2 percent, from 4.6 percent at end of 2003. The lowest level of this indicator highlights improvement in lending quality and limited banking system exposure to credit risk. Downward trend of capital adequacy ratio during 2004 was due to a better exploitation of banks’ capacities in terms of extending in riskier investments. During 2004 the supervision process, trying to be proactive and continuous, had on its focus the risk assessment of banks’ activity. Following up the requirements of Supervision Development Plan, the document on “Operative Supervision Policy” was drafted and approved, prescribing banks’ supervision principles. In view of this policy, the supervision cycle for banks that present less concern to supervision is lengthened from 12 months to 18 months, whereas for problematic banks it is reduced to 6 months.
The American dollar was appreciated in the first part of the year, as a consequence of expectations for a tightening of the United States monetary policy. But, during the second part of the year, the attention of financial markets mainly focused on the structural problems of the American economy, that of the budget deficit and current account deficit. These concerns brought about a quick decrease in the American dollar value, reaching the minimum levels against the common European currency. In face of these developments, both monetary policy and fiscal policy of larger economies maintained expansionist features. Notwithstanding the rise of US dollar interest rates, they remained at low historical levels while Euro interest rates remained unchanged. The fiscal policy has impacted the growth of domestic demand, either in the euro area or in the United States. The progressive integration of the Albanian economy in the international markets of products and capitals makes that this economy benefits from these incentive policies, in the form of lower interest rates for foreign currency and in the form of higher demand for its exports. Placed in this positive background, the Albanian economy growth continues to be generated from the dynamic development of the private sector, while maintenance of the macroeconomic stability and economic growth support through investments in the priority development fields: infrastructure, education and health, have been a priority to the public sector. BIS Review 38/2005  1  During 2004, investments in the economy marked the same level as during 2003, representing nearly 25.4 percent of GDP.