Greek banks have been present in the market since 1996; the German and Italian investment has been present for quite a long time as well, while the latter has grown substantially and has become one of the market’s key actors. Austrian investments may be considered as the most dominant ones. Their ownership has resulted from the acquisition of the largest domestic state-owned bank. The long presence of foreign banks in the Albanian banking system has influenced the establishment of a stable banking system and its stable growth. Despite the financial collapse of 1997 or the panic crisis in 2002, in none of the cases was the system’s performance a source of crisis or instability. Previously, foreign banks were more conservative in terms of expanding their geographical activity; however, the entry of Raiffeisen Bank into the market pushed them to be more active. This fact may be evidenced by the variety of products provided in the market, the growth of lending and the employment of clear strategies to increase or maintain their market share. However, the economic benefits deriving from the presence of foreign banks have not reached the proper levels yet. The enhancement of the quality of information provided to the public at large and to the central bank, the lowering of the intermediation cost, the further improvement of risk management, and the standardization of the accounting and financial reporting systems are not in the desired levels yet.
Now let us now turn briefly to the possible financial relationship between the Albanian banking system and the production foreign investments flow. Undoubtedly, the positive influence foreign direct investments have on economic growth depends largely on their recipient countries’ circumstances. It requires a substantial level of financial system development as a crucial precondition. A developed financial system improves the efficiency in allocating the resources and it further enhances the country’s capacity to absorb the FDI. The entry of new investors will orient the concentration of market segments to large-size businesses. Their impact, along with the lending capacity of our banking market, are believed to be the crucial proof for their success in Albania. In more concrete terms, the circumstances in Albania are such that there is an asymmetrical distribution of total assets between banks in the market. The reference is only to banks, since in terms of total assets, the banking system shares more than 90 per cent. Other non-bank financial institutions play a more insignificant role than the commercial banks. As far as the latter is concerned, there are many qualitative banks in the market, whose presence is an attractive factor for absorbing the FDI. On the other hand, the concentration of assets and banking loans in a few commercial banks bears the risk of creating an oligopolistic environment where only a few banks establish the terms for new loans. Such a situation would increase the investment cost in the public and private sector and in households, as well.