The banking system in Albania has led other sectors in the process of transition to a market-based and led economy. In April 1992, new laws established the Bank of Albania as the nation's central bank and established three state-owned commercial banks. The Bank of Albania has a high degree of autonomy and has been given the responsibility and the necessary tools to maintain the internal and external stability of the lek, Albania's national currency. The commercial banks may accept deposits from, and extend loans to, Albanian residents and enterprises in either leks or foreign currency. The commercial banks are regulated and inspected by the Bank of Albania using internationally accepted standards and practices.

Since 1992, the number of banks in Albania has risen to ten. The seven new banks have been established by private investors, foreign banks wishing to establish operations in Albania and through joint ventures with a state-owned Albanian bank. Since 1992, the Bank of Albania has made a significant contribution to establishing and maintaining a stable macroeconomic environment and to creating a modern financial system in Albania. In 1995, the inflation rate in Albania had slowed to six per cent, compared with 15.8 per cent in 1994 and 240 per cent in 1992. While fluctuating on a day to day basis, the lek has in turn generally been on an appreciating trend against major international and regional currencies.

At the beginning, the nucleus of a modern system of monetary policy was established with the introduction of reserve requirements, a discount window and interest rate management. Operationally, the Bank of Albania controls growth in the monetary aggregates and maintains real interest rates at positive levels to establish and maintain confidence in the internal and external value of the lek.

More recently, as the volume of outstanding Treasury bills has increased, the Bank of Albania has actively supported the development of a secondary market for these instruments. This has allowed the Bank of Albania to engage in open-market operations as a means of controlling the overall rate of growth in money and credit, while at the same time offering banks and enterprises an effective tool to manage their short-term liquidity positions. Sales of Treasury bills to the non-bank public will also help limit the Government's recourse to bank financing.

The Bank of Albania has liberalised the exchange rate system in Albania and there are no restrictions on lek convertibility for current account transactions. The exchange rate for the lek is freely determined in the domestic interbank market, which competes with a considerable number of independent foreign exchange bureaux and dealers.

The Bank of Albania is actively working to broaden its available range of monetary policy tools to broaden and deepen domestic financial markets and to move as quickly as possible towards the sole use of indirect instruments in the implementation of monetary policy.

Bank	Ownership
Bank of Albania (BoA) (central bank)	State-owned
National Commercial Bank of Albania (NCB)	State-owned
Savings Bank of Albania (SBA)	State-owned
Rural Commercial Bank of Albania (RCB)	State-owned
Italian-Albanian Bank	Joint venture (NCB - Banca di Roma Italy)
Arab Albanian Islamic Bank	Joint venture (NCB - Arab Islamic Bank Bahrain)
Dardania Bank	Foreign private bank
Tirana Bank	Foreign private bank
National Bank of Greece	Foreign private bank
International Commercial Bank	Foreign private bank

The National Commercial Bank of Albania (NCB) has a network of 30 branches throughout Albania. Most of its liabilities, enterprise deposits and a significant portion of its lending is to state-owned and private sector enterprises. It provides short-term loans to enterprises to support their commercial and production activities and long-term lending primarily for major investment projects. NCB has established correspondent banking relationships with 21 banks abroad - 19 in Europe and two in the US. It is also a partner in the Italian-Albanian Bank and the Albanian Arab Islamic Bank, with a 40 per cent equity position in each.

The Savings Bank of Albania has 40 branches throughout Albania, which is the largest network among Albanian banks. Currently, its liabilities are primarily household time deposits. Its loan portfolio, though small, is rising fast, and consists mainly of short and medium-term loans to the private sector. It issues Eurocard, Mastercard, Travellers Cheques, American Express, Thomas Cook and Eurocheques. Both the NCB and the SB handle foreign exchange transactions with enterprises and individuals.

The Rural Commercial Bank has recently been created following the restructuring and recapitalisation of the late Bank for Agriculture and Development. The RCB carries out normal commercial banking activities with special emphasis on the agricultural sector. It does not offer foreign exchange transactions although it will accept foreign currency deposits from its customers.

The Bank of Albania has recognised the crucial role that foreign capital, management and technology can play in the modernisation of the Albanian banking system. The establishment in late 1992 of the first joint venture bank in Albania was an important step forward in this regard.

The Italian-Albanian Bank was the first joint venture bank. Its shareholders are the National Commercial Bank, with 40 per cent of the shares, Banca di Roma, also with 40 per cent, and the European Bank for Reconstruction and Development (EBRD) with 20 per cent. This bank provides full banking services, including the acceptance of deposits, wire transfers, commercial lending and foreign exchange transactions.

The Albanian Arab Islamic Bank is also a joint venture bank. NCB has 40 per cent of the shares and the other shares are held by foreign banks and individuals. It provides full banking services with the exception of lending operations and term deposits.

The Dardania Bank is the first private bank in the country and it has so far engaged in moderate commercial banking activities.

The Tirana Bank was established in Tirana in September 1996 with a paid up capital of two million United States (US) dollars; this was recently increased to four million dollars. Its principal shareholder is the Bank of Piraeus in Greece. The Tirana Bank offers full commercial banking services and also acts as an adviser.

The National Bank of Greece is completing the necessary preparations for banking operations and activities in Tirana. This bank plans to offer the full range of universal banking products and services.

The Bank of Albania has recently approved the licence for the International Commercial Bank, a foreign private bank established in Tirana by Malaysian investors with a paid-up capital of $2.5 million.

Through the licensing process, the Bank of Albania determines the qualification of potential applicants for bank licences. New simplified and transparent licensing procedures have been put in place. The minimum required capital for the establishment of a new bank is $2 million. The new regulations also set the stage for the creation of new private banks which will increase competition and improve the quality and price of banking services available to Albanians. A primary goal, however, is to ensure the sound operation of the Albanian banking system.

The financial sector reforms, in which the Bank of Albania has worked with the Government, aim to increase the efficiency of the central bank as a monetary authority and to increase the number of commercial banks capable of performing basic banking services. They also aim to create an appropriate regulatory framework and an efficient payment system.