Approval of law on the recovery and exceptional intervention on banks on the Republic of Albania

Official Bulletin no.263, dated 11 January 2017

The Parliament of Albania, approved on 22.12.2016, law no.133/2016 “On the recovery and exceptional intervention on banks on the Republic of Albania” according to which, the legal framework on the recovery and exceptional intervention on banks and banks of foreign branch on the Republic of Albania, is created.

Firstly, this law defines the rules, procedures and instruments used on the recovery and exceptional intervention on banks and banks of foreign branch on the Republic of Albania.

Secondly, this law defines the competences of the extraordinary interventions authority and the supervisory authority, which are being undertaken by the Bank of Albania. Several legal instruments are given to the Bank of Albania (Extraordinary Intervention Authority), in order to intervene on a sufficiently early and fast stage, in case of a bank of a non-financially and economically healthy status, by always minimizing the impact of its collapse on the financial system, creditors and general economy of the country.

Finally, this law defines the creation, financing and use of the extraordinary administration fund, as well as its administration. The instruments determined by law insure that firstly the shareholders, followed secondly by the creditors, maintain the costs of an eventual collapse of the bank. For this reason, the law foresees the creation of a fund mainly by bank contribution, which aims to be consolidated in a few years and in case of risk to be used to ‘save’ one or several banks, in accordance with the defined conditions by law.

The fund will be administrated by the Deposit Insurance Agency, and regulated by the law “On Deposit Insurance”. The used term on extraordinary intervention is ‘bail-in’ in comparison with the governmental intervention, as defined by the change made on 2012, by using public finances and charging taxpayers on the burden of saving the bank, so called ‘bailout’.  Therefore there is a change of instrument, high qualitative, but far away from the being a cost for taxpayers, as well. In the concrete case, an obstructive instrument by bank contribution is provided, with a fund created by bank’s contribution throughout years, used by the Deposit Insurance Agency, according to the determined procedures by law.

Relevant instruments give a chance to the Intervention Authority, in the concrete case to the Bank of Albania, to maintain the sustained opportunity in deposit ingathering and make payment transactions, by selling rental pieces of the bank if necessary and cover the loss in a manner that avoids the destabilization of the financial market and minimizes the cost attributed to taxpayers.