Law against bad loans

The International Monetary Institutions are also involved, especially the World Bank, the representatives of which were having intensive meetings with the political force in order to not delay the approval of the law that requires qualified majority in Parliament.

But what are the amends proposed in the Civil Code? Two are the main reasons, and both are related with the execution of properties that were left as pledge by creditors who have been unable to pay. The first decision facilitates the selling procedure from banks, reducing the final sale price from 64% of the value to 40%.

This means that for a seized property that has been assessed with a value of 100.000 EUR, banks are allowed to sell it up to 40.000 EUR, in order to recover the unpaid loan. The second change is related with the delay of judicial processes. According to the authorities, the sale of many seized properties is delayed, since creditors appeal at the Court. The latter blocks the process until the trial is over, which could go on for years and it makes it impossible to sell the property. The appeal and sale blockage in the new code is almost impossible. Besides the two measures proposed in the Code, Bank of Albania and the Ministry of Finances have proposed a third one, which allows private banks to delete loans that cannot be recovered any more, the ones that are considered lost and that have reached 420 million USD.

Some of these will fulfil some given conditions, for which all the legal efforts are made for a quick recovery. After being deleted, banks will not have the obligation to cover them with reserves or to increase the capital. Although there are some preliminary accounts about the number of bad loans that will be deleted, Bank of Albania has not made them public.

Albania, model before 2007

By the end of 2007, before the economy was feeling the crisis, Albania was a model country for paying loans. Bad loans at that time were only 3.3%, but the situation deteriorated and the trend had an unstoppable growth.

By the end of the last year, this number reached 22.76%, or 1.260 million USD. The strong increase of problematic loans was a constant concern for the international institutions that monitor the Albanian economy.

IMF has declared that this deterioration is one of the biggest dangers for the economy and the financial stability. The World Bank has held the same stance. The last amends at the Civil Procedure Code were even planned with the experts of this institution.

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