Page 29 - BKT Annual Report 2024 EN

Risk Management

Group

The Albanian banking sector has shown remarkable resilience over the past year, supporting
economic growth despite external uncertainties. In 2024, Albania’s economy grew by about 4%,
leading to increased employment and wages. Inflation decreased significantly to 2.1%, easing
financial burdens on households and businesses. Moody’s upgraded Albania’s credit outlook,
reflecting expectations of stable growth driven by essential reforms and foreign direct investment
in key sectors like tourism and energy.

BKT maintains a strong capital and liquidity

position, with resilient asset quality despite

a challenging macro-financial environment.

Forecasts for 2025 indicate continued

economic growth driven by consumption,

investment, and the tourism sector.

However, global economic challenges are present, BKT has maintained low operational risk losses compared
with projected GDP growth rates of 2.0% for the U.S., to previous years, focusing on minimizing financial losses
0.9% for the Eurozone, and 4.2% for China, all below and reputational damage while optimizing control
historical averages. Persistent inflation may arise from procedures. The bank is developing an efficient system
increased fiscal spending and tariffs, complicating for managing operational risk, which includes creating a
central banks’ efforts to manage interest rates. BKT historical database, monitoring key risk indicators (KRI),
aims to enhance resilience against macro-financial and fostering a risk-aware culture. Emphasis is placed
threats and geopolitical shocks through careful credit on information security due to the significant threat of
risk management and operational resilience while cyber-attacks, and attention is given to outsourcing
addressing climate risks and digital transformation. BKT risks. Regulatory changes are expected to pose
has rebalanced its security portfolio towards sovereign challenges that require internal adaptations, highlighting
assets and reduced its duration to enhance liquidity the need for effective management of operational risks
and improve the average credit rating of its holdings.
All regulatory ratios indicate that the bank remains well- BKT has actively monitored legislative changes to
capitalized and highly liquid. ensure compliance with legal norms, focusing on the
transparency of banking products and services. The
In 2024, the Credit Assessment Department focused on lending process for businesses has been simplified
thorough financial reviews of business and retail clients’ under the cadaster legislation. Legal risk analysis and
debt capacities, adhering to the bank’s Credit Policy. product design in accordance with applicable laws
RMG played a key role in identifying and monitoring have been prioritized, alongside following up on non-
risks, offering tailored recovery solutions for customers performing loan (NPL) cases to recover debts. The bank
based on their situations. For nonperforming clients, a has participated in discussions on draft laws through
proactive follow-up approach was adopted, and when the Association of Banks, emphasizing collaboration
necessary, legal procedures for collateral enforcement with state institutions to establish best practices.
were initiated to recover outstanding debts. The bank Additionally, BKT has introduced innovative business
maintained a strong performance in its loan portfolio, methods that align with legal requirements, enhancing
achieving a low non-performing loan (NPL) ratio of client services through online channels and digitization.
2.50% according to IFRS and 3.34% per Bank of Albania
standards, compared to 4.48% for the overall banking
system as of November 2024.”

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