The Euroisation of Banks’ Portfolio and the Credit Risk in Albania
AbstractThe loans portfolio of the Albania banking system has a high level of euroisation, as well as in other countries of the region. In Albania, the loans in foreign currency represent 49% of the total loans outstanding. The high level of the euroisation of banks’ portfolio exposes them to the risk of direct and indirect exchange rate. Although the banks have been protected from the direct exchange rate, they are exposed to the risk of indirect exchange rate. This risk might increase if the national currency depreciates according to other currencies. At the end of 2014, the loans denominated in foreign currency to the borrowers, whose incomes are in All (Albania currency) were 31.3%, representing 186.4 billion All of the total loans and approximately 50% of the loans denominated in foreign currency. This portion of the loans is influenced by the changes of exchange rates, thus the indirect credit risk may increase, as a result of the difficulties of the borrowers to pay their loans. This research aims to provide evidence, based on a statistical analysis, that the instability of the national currency, in relation to Euro and the American Dollar, have influenced upon the systematic credit risk in Albania.
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