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Albanian central bank seeks safety fund to back stop bank failures
December 6, 2016 / 3:57 PM / a year ago

Albanian central bank seeks safety fund to back stop bank failures

TIRANA, Dec 6 (Reuters) - Albania’s central bank will ask banks to create a safety fund to rescue them should bankruptcies endanger the nation’s financial stability, officials said on Tuesday.

Finance Minister Arben Ahmetaj and Central Bank Governor Gent Sejko said the goal of the fund would be to spare the taxpayers the burden of saving any of its 16 commercial banks, all but one of which are foreign and mostly subsidiaries.

The Extraordinary Intervention Authority would be set up at the central bank and is modelled on the Banking Recovery and Resolution Directive of the European Union, a report accompanying the draft said.

Albania wants to join the EU.

“One of the goals of the draft law is to avoid as much as possible such actions (rescues) by the state,” Ahmetaj told parliament’s economy commission.

Sejko said the fund will be created with money from the banks but did not detail how much they will contribute. The law empowered the authority to take over control of the bank when it poses risks to the system.

It foresaw the sale of the banks’ commercial activity, creating a bridge bank and their internal capitalisation, among other measures, the report said.

The opposition Democratic Party questioned the wisdom of creating the fund while the banking system faced no added risks.

“Is this the right time to require extra costs when we expect the banking system to take the risk (of lending more) to help the economy come out of its sleepy state,” asked Ridvan Bode, a former finance minister.

Spiro Brumbulli, the secretary general of the Albanian Association of Banks, told Reuters the association agreed with the measure, which has to be applied six months after the draft becomes law. (Reporting By Benet Koleka, Editing by Jeremy Gaunt)

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