Stress Testing the Albanian Banking Sector: A Decade Post-FSAP
Selected Issues Papers, April 16, 2025
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- Stress Testing the Albanian Banking Sector: A Decade Post-FSAP
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Bibliographic details
- Authors: Jakree Koosakul, Eugena Topi
- Published: April 16, 2025
- Series: Selected Issues Papers
- DOI: https://doi.org/10.5089/9798229007603.018
Authors and Publication
- By Jakree Koosakul, Eugena Topi
- April 16, 2025
- Selected Issues Paper No. 2025/039
- Pages: 13
- Volume: 2025
- Issue: 039
- DOI: https://doi.org/10.5089/9798229007603.018
- ISBN: 9798229007603
- ISSN: 2958-7875
Executive summary and context
- Over the past decade, the Albanian banking sector has undergone a remarkable transformation amid strong macroeconomic performance and sound financial reforms.
- Pockets of vulnerability remain, including some identified during the IMF’s 2014 Financial Sector Assessment Program (FSAP).
- The paper conducts capital adequacy and liquidity stress testing exercises using supervisory bank-level data to assess sector resilience.
Stress testing approach
- Exercises: capital adequacy and liquidity stress testing.
- Data: supervisory bank-level data.
- Shock channels explicitly assessed: non-performing loans, interest rates, large-borrower exposures, and sovereign exposures.
- Liquidity testing considers banks’ holdings of high-quality liquid assets and access to the Bank of Albania's liquidity facility.
Key findings
- Banks show broad resilience to shocks arising from non-performing loans and interest rates.
- Vulnerabilities owing to large-borrower and sovereign exposures are material in some cases.
- Under liquidity stress scenarios, banks are found to have adequate high-quality liquid assets, but:
- Such resilience hinges importantly on their access to the Bank of Albania’s liquidity facility.
- The overall assessment indicates progress since the 2014 FSAP but highlights remaining concentrated risks.
Policy implications and recommendations
- Further strengthening of the macroprudential toolkit is warranted.
- Continued efforts to deepen financial markets are recommended to reduce reliance on central bank liquidity support and to mitigate large-borrower and sovereign concentration risks.
Subjects and keywords (as listed)
- Subjects: Asset and liability management; Capital adequacy requirements; Commercial banks; Financial institutions; Financial regulation and supervision; Financial sector policy and analysis; Liquidity; Liquidity requirements; Stress testing.
- Keywords: Albania; Albanian banking sector; Bank of Albania's liquidity facility; banking sector; capital adequacy; Capital adequacy requirements; Commercial banks; Eugena topi; Global; large exposure; LCR value; liquidity; Liquidity requirements; resilience hinge; sovereign-bank nexus; stress testing.
Source: "Stress Testing the Albanian Banking Sector: A Decade Post-FSAP", Selected Issues Papers (2025), by Jakree Koosakul and Eugena Topi; DOI: https://doi.org/10.5089/9798229007603.018
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- Stress Testing the Albanian Banking Sector: A Decade Post-FSAP