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IMF criticizes Bank of Albania's measures to facilitate PPP lending in infrastructure
2025-11-25 08:40:50 / EKONOMI&SOCIALE
The International Monetary Fund (IMF) mission has criticized the Bank of Albania's decision to facilitate loans to finance strategic infrastructure projects.
In the closing statement of the IMF mission to Albania, it is stated that the recent relaxations in risk levels within the framework of capital adequacy and large bank exposures for loans supporting strategic transport infrastructure are not fully in line with international standards and should be reconsidered, as prudential regulations should be risk-based and not used to encourage lending in specific sectors.
In July of this year, the Supervisory Council of the Bank of Albania approved several regulatory changes that facilitate the granting of loans by commercial banks for strategic infrastructure projects. The changes were proposed by the Albanian Banking Association and have been approved by the Central Bank.
According to the regulation, projects in strategic transport infrastructure will be considered financing of projects in the form of construction of new or existing infrastructure, in the fields of road transport and port and airport infrastructure and where the commercial company has a contract or agreement with the relevant state institution.
Banks will weight exposures to commercial companies that finance projects in strategic transport infrastructure with a 50% risk weight (previously these loans were weighted with a 100% risk weight), if the conditions provided for in the regulation are met.
Such an action makes granting loans of this type less costly in terms of capitalization and expands the scope of banks to finance projects of this type.
In general, loans for road infrastructure projects affect large amounts, so they also have a significant impact on the capital adequacy ratio, which measures the ratio between risk-weighted assets and regulatory capital.
In the regulation "On the capital adequacy ratio", a new article has been added, which stipulates that banks identify separately from the class of exposures to commercial companies, exposures to commercial companies that finance projects in strategic transport infrastructure that meet certain specific conditions. The amended regulation establishes as a condition that the final beneficiary of the financed project is the Albanian government.
The loan must have a maturity of up to 10 years and the loan contract for the exposure in question must provide the bank with a high level of control over the project assets and the income generated from it.
Also, the source of loan repayment must consist of at least two-thirds of the income generated by the financed project. Another criterion is the borrower's estimated ability to meet his financial obligations, even under severe stress conditions related to the risk of the financed project.
The provisions of the new regulation will apply to all exposures to commercial companies financing strategic transport infrastructure projects, which will be established by December 31, 2026, and will be applicable until the approved financing term, which in any case should not exceed 10 years.
For the same purpose, the Bank of Albania has also approved several amendments to the regulation "On the management of risk from large exposures of banks".
In this regulation, a provision has been added that stipulates that banks, in calculating maximum allowable exposures, exclude, among other things, exposures, with no more than 50% of their value, to commercial companies that finance projects in strategic transport infrastructure./ Monitor
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