Bank of Albania (BoA)

Overview

The Bank of Albania (Banka e Shqipërisë) is the central bank of the Republic of Albania, established as an autonomous and independent institution responsible for monetary policy, banking supervision, and financial system stability. Founded under the Law No. 8269 of December 27, 1997, the Bank of Albania operates independently from any other authority in pursuit of its statutory objectives and is accountable to the Assembly of the Republic of Albania.

The Bank serves as the sole institution responsible for designing, compiling, approving, and implementing Albania's monetary policy. It acts as the banker to the government, manages foreign exchange reserves, oversees the payment systems, and supervises licensed financial institutions operating within the Albanian banking sector.

Albania is an EU candidate country pursuing full membership in the European Union. This status influences the Bank of Albania's regulatory framework, which increasingly aligns with EU standards and directives. The central bank maintains international cooperation agreements with the European Central Bank (ECB), other central banks in the region, and multilateral financial institutions.

Basic Identity

Classification

Inclusion Justification

What This Entity Oversees

Supervisory Authority:

The Bank of Albania exercises comprehensive supervision over all licensed credit institutions operating in Albania, including domestic banks, branches of foreign banks, and other financial institutions providing banking services.

Licensing and Authorization:

• The Bank issues and withdraws banking licenses to ensure only appropriately capitalized and managed institutions operate in the market
• Authorization requirements include minimum capital thresholds, governance standards, and compliance with prudential regulations
• Approval of changes in ownership structure and senior management appointments

Prudential Regulation:

The Bank establishes and enforces prudential requirements covering:

• Minimum capital requirements and capital adequacy ratios
• Liquidity management standards
• Large exposure limits and concentration risk management
• Asset quality standards and loan classification requirements
• Operational risk management frameworks

On-site and Off-site Supervision:

• Regular examination programs to assess institutional soundness
• Off-site monitoring through prudential returns and financial data submissions
• Stress testing exercises to evaluate institutional resilience
• Compliance reviews and regulatory audit functions

Corrective Actions:

The Bank has authority to take graduated enforcement actions, from warning letters to withdrawal of authorization, based on violations of banking regulations or deterioration in institutional condition.

Supervisory Role:

The Bank of Albania is the regulator, licensor, and supervisor of banks in Albania, with responsibility for monitoring and ensuring compliance with Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) requirements.

Regulatory Framework:

The AML/CFT compliance regime is based on:

• Law No. 10192 of 2009 "On Prevention of Money Laundering and Financing of Terrorism"
• Financial Action Task Force (FATF) Recommendations (40 Recommendations + 9 Special Recommendations)
• EU Directives on AML/CFT (including the Fifth Anti-Money Laundering Directive)

Supervision and Compliance:

• Prudential regulations requiring banks to establish AML/CFT compliance functions
• Customer Due Diligence (CDD) and Know Your Customer (KYC) procedures
• Suspicious Activity Reporting (SAR) requirements and reporting to the Financial Intelligence Agency (FIA)
• Enhanced Due Diligence (EDD) for high-risk customers and jurisdictions
• Sanctions screening and export control compliance

Recent Reporting:

According to the Financial Intelligence Agency (FIA) Annual Report 2024, during the reporting period:

• 1,632 Suspicious Activity Reports (SARs) were submitted to the FIA
• Banks remained the largest contributors to AML/CFT reporting
• Coverage of reporting requirements across both financial and non-financial sectors

Beneficial Ownership Transparency:

Albania has strengthened transparency of legal arrangements and improved regulation and supervision of non-financial institutions, achieving a rating improvement from Partially Compliant to Largely Compliant on FATF Recommendations 25 and 28.

Regulatory Powers

Enforcement Authority:

The Bank of Albania possesses comprehensive enforcement powers to ensure compliance with banking regulations and prudential requirements.

Enforcement Tools:

• Issuance of warnings and compliance orders
• Imposition of financial penalties and fines
• Suspension of specific banking activities or services
• Restrictions on dividend payments or capital distributions
• Mandatory corrective action plans with monitoring timelines
• Withdrawal of banking license in cases of serious violations or insolvency

Administrative Proceedings:

The Bank follows administrative procedure law in enforcement actions, providing institutions with due process rights and opportunities to respond to compliance concerns.

Coordination with Other Authorities:

• Cooperation with the Financial Intelligence Agency on money laundering and terrorist financing cases
• Coordination with government authorities on financial stability and payment system issues
• Information sharing with regional and international supervisory authorities

Regulatory Role and Function

Legal Foundation

Constitutional Framework:

• Constitution of the Republic of Albania, Article 161: Establishes the status and independence of the central bank

Primary Legislation:

• Law No. 8269 of December 27, 1997 "On the Bank of Albania": Defines the institution's objectives, duties, organizational structure, governance, financial management, and relationships with the banking system and state institutions
• Law on the Supervisory Authority for Financial Services: Establishes the regulatory and supervisory framework for financial market participants

Subordinate Regulations:

• Central Bank regulations and decisions on monetary policy implementation, banking supervision, payment systems, and AML/CFT compliance
• Regulatory Framework for Supervision, published on the Bank of Albania's official website

The Bank operates within a framework aligned with international standards established by the Basel Committee on Banking Supervision, the Financial Action Task Force (FATF), and EU regulatory directives, reflecting Albania's integration into European financial systems.

Licensing and Authorization Relevance

The Bank of Albania (BoA) is a key licensing authority in Albania's financial system:

The licensing process typically involves assessment of capital adequacy, fitness and propriety of management, business plan viability, AML/CFT compliance frameworks, and IT systems readiness.

Payments and Money Movement Relevance

Primary Objective:

The primary objective of the Bank of Albania is to achieve and maintain price stability. The Bank establishes a target inflation rate of approximately 3.0% as the foundation for monetary policy decisions.

Monetary Policy Strategy:

The Bank employs a forward-looking monetary policy framework targeting medium-term price stability while supporting sustainable economic growth. The central bank continuously monitors economic indicators, inflation trends, and macroeconomic developments to calibrate policy instruments.

Monetary Policy Implementation:

Implementation strategy consists of three key components:

1. Appropriate sizing of the banking system's liquidity deficit to ensure monetary policy transmission effectiveness
2. Forecasting liquidity needs of the banking system arising from autonomous liquidity factors over the policy horizon
3. Execution of open market operations (OMOs) to manage system-wide liquidity

Policy Instruments:

• Policy Rate: The interest rate on repurchase (reverse) agreements with one-week maturity serves as the benchmark policy rate
• Open Market Operations: Regular weekly auctions of liquidity-absorbing and liquidity-injecting operations
• Standing Facilities: Overnight lending and deposit facilities providing automatic access to liquidity at predetermined rates
• Reserve Requirements: Minimum reserve requirements on bank deposits to support monetary control

Target Transmission:

The Bank expects monetary policy to provide positive contributions to Albanian economic progress through effective transmission mechanisms to inflation expectations, credit conditions, and aggregate demand.

Payment System Oversight:

The Bank of Albania is responsible for the safe, efficient, and stable operation of payment and settlement systems. The central bank sets standards for payment operations and system participants.

System Infrastructure:

• TARGET2-Compatible Systems: Albania's payment system architecture aligns with European standards
• Real-Time Gross Settlement (RTGS): High-value payment clearing and settlement
• Automated Clearing House (ACH): Lower-value retail payment processing
• Central Securities Depository: Securities settlement and custody functions

Payment Services Regulation:

The Bank supervises providers of payment services and electronic money institutions. Licensing requirements apply to payment institutions and electronic money institutions offering services in the Albanian market.

Payment System Standards:

• Adoption of SEPA (Single Euro Payments Area) standards where applicable
• Compliance with Committee on Payments and Market Infrastructures (CPMI) principles
• Risk management standards for system operators and participants
• Interoperability requirements for payment service providers

Foreign Exchange Management:

The Bank of Albania manages the country's foreign exchange reserves and regulates foreign exchange operations in the banking system. The Albanian lek (ALL) is the official currency.

Exchange Rate Policy:

The Bank operates within a flexible exchange rate regime, allowing market forces to determine the lek's value against foreign currencies while maintaining stability.

FX Supervision:

• Establishment of prudential limits on foreign exchange exposure
• Monitoring of banks' foreign currency positions
• Regulation of foreign exchange dealers and brokers
• Oversight of cross-border payment flows

Reserve Management:

The Bank maintains adequate foreign exchange reserves to support monetary policy objectives, cover external liabilities, and provide stability assurance to market participants.

Payment Systems Governed or Overseen

The Bank of Albania (BoA) operates and/or oversees the national payment and settlement infrastructure of Albania. Specific systems include:

[Further detail on specific system names requires verification from official sources]

Relationship to Other Regulators

European Integration:

Albania is an EU candidate country and increasingly aligns its regulatory framework with European standards. The central bank cooperates with the European Central Bank and EU supervisory authorities.

Regional Participation:

The Bank of Albania participates in:

• Regional central bank forums and working groups
• Committee of Central Banks of the Balkans
• Coordination mechanisms with neighboring central banks

International Standards Alignment:

• Adoption of Basel III capital requirements and prudential standards
• Implementation of CPMI principles for payment system oversight
• Compliance with FATF mutual evaluation recommendations
• Cooperation with the International Monetary Fund (IMF) on financial sector assessments

Bilateral Cooperation:

The Bank maintains cooperation agreements with:

• European Central Bank (ECB)
• Federal Reserve System and other major central banks
• International Bank for Settlements (BIS)
• National supervisory authorities in EU and other countries

Geography and Jurisdiction Notes

Important Departments and Divisions

Key Public Resources

Headquarters:

Bank of Albania

Sheshi Skënderbej, 1

Tirana 1001

Albania

Official Website:

www.bankofalbania.org

Key Departments:

• Monetary Policy Department
• Banking Supervision Department
• Payment Systems Department
• Financial Stability Department
• Compliance and AML/CFT Division

Contact Methods:

• General inquiries: [email protected]
• Supervision-related matters available through official website

Notes on Naming and Language