Another institution set up during the crisis, in which the FROB has a stake, the Sociedad de Gestión de Activos Procedentes de la Reestructuración Bancaria (Sareb), also played a significant role in this process. Between December 2012 and March 2013, Sareb assumed property development loans with a gross value of approximately € billion and foreclosures of € billion. Thus, against a background of notable declines in their activity levels, banks have managed to reduce the weight of troubled assets on their balance sheets very significantly. Specifically, the non-performing loans ratio has decreased by more than eight percentage points and currently stands at 5.7% of total credit. Foreclosures, meanwhile, are at half the level recorded in 2014. Over this period there was also a significant improvement in the solvency ratios of Spanish credit institutions, which increased their tier 1 capital ratio from 7.5% in 2007 to 13.5% at the end of 2018. Despite these improvements, the Spanish financial sector clearly continues to face significant challenges. Among other factors, these arise from a non-performing loans ratio that is still higher than before the crisis, a rate of return below the cost of capital, and capital levels that, despite exceeding the minimum regulatory requirements, are on average below those of other European countries and below those needed to restore its reputation. 1  Consolidated groups and institutions not belonging to a group that are Spanish owned.
This situation has most affected sectors of the economy such as construction, which relies totally on domestic demand and, at a lower extent, other sectors such as industry, which generates most of its activity from external demand. Under these circumstances, investments pace was relatively lower, compared with previous years. The Bank of Albania considers that domestic consumption and investments will have a better performance during the current year. Conditions for funding the private sector demand appear improved, while risk premia in financial markets appear lower. Uncertainty for the future should gradually decrease. Additionally, the expected positive influence of external demand and fiscal policy during 2011, are expected to stimulate domestic demand. Correction of fiscal conduct is followed by a lower contribution to the economic growth during 2010. Public expenditure reduced by about 5% year-on-year, while the budget deficit reduced by about 4 p.p. of the GDP. The Bank of Albania has always highlighted that fiscal stability is a fundamental precondition for a long-term economic growth. In this context, we deem that respecting objectives on budget deficit and public borrowing during 2011 will yield a positive contribution to the country’s economic development. Maintaining relative levels in budget deficit will eliminate a direct negative effect on economic growth, while relatively low levels of public borrowing will have an impact on the control of long-term interest rates and reduction of risk premia in financial markets. These developments were manifested during the second half of 2010 and are expected to stimulate domestic demand during 2011, as well.