BAD DEBTS OF THE BANKING SYSTEM IN ALBANIA

The aim of the article is to give an overview of the bad loans situation in recent years in Albania. This is a systematic review of reports and articles published in literature and web regarding the trend of the bad loans in Albania and interaction with economic situation. Referring to the official data of the last 14 years in Albanian economy, we could demonstrate that there is a negative correlation between the real economy and the nonperforming loans rate in the banking sector. Until the end of 2007, before the crisis, Albania was a model in terms of loan payments. According to official source, the level was only 3.3%. At the beginning of 2008 until January 2009 this level increased up to 6.8%. On May 2010 the level increased up to 12% of bad loans related to total loan portfolio and on 2011 reached the level of 18.8% and on December 2012 was 22.76% or converted in 1 milliard and 260 million of USD of all portfolio referred always to official sources. On 2013 the level reached 24.4% and in the recent data published for 2014 is supposed that this level is nearly 23%. Continuous monitoring of the evolution of the economy is important for the periodic assessment of overall asset quality and credit risk avoidance. A reform in the banking system is needed to manage the structures responsible for the permission of loans.