Banks ask the Bank of Albania to facilitate loans for PPPs in infrastructure

The Albanian Banking Association has sent a proposal to the Bank of Albania, requesting that loans granted for strategic projects in the transport sector be classified as low risk for regulatory purposes.

Market sources indicate that the banking sector's proposal is mainly related to the financing of roads, ports or airports, works for which the concession or public-private partnership (PPP) mechanism has been used in the last decade.

The Bank of Albania is considering the possibility of accepting the banks' proposal and the decision is expected to be approved at one of the next meetings of the Supervisory Council.

The recognition of a lower risk means that loans granted to these sectors are weighted with smaller coefficients, for the purpose of calculating the capital adequacy ratio.

Such an action would make granting loans of this type less costly in terms of capitalization and would increase the banks' scope to finance projects of this type.

In general, loans for road infrastructure projects are large in size and therefore have a significant impact on the capital adequacy ratio, which measures the ratio of risk-weighted assets to regulatory capital. For this reason, banks' capacity to finance projects of this type may be limited.

Over the past few years, the banking sector in the country has shown a growing appetite to finance important infrastructure PPP projects.

Last month, Tirana Bank signed a 17 million euro loan agreement with the company "Marina Vlorë", which is implementing the concession project to build a yacht port in Vlorë, attached to a residential and hotel complex, "Vlora Marina", according to a model similar to the one being built in the Port of Durrës.

At the end of 2023, three Albanian commercial banks decided to finance with a joint (syndicated) loan the public-private partnership project for the construction of the Thumanë-Kashar road. The American Investment Bank, Tirana Bank and Union Bank financed with more than 30 million euros the construction of the Thumanë-Kashar road.

In 2021, Intesa Sanpaolo Bank Albania, OTP Albania and Tirana Bank financed a joint loan of 26 million euros to the concessionaire company "Orikum-Llogara".

The most important publicly funded PPP project in road construction is the Arbri Road. This project has been supported with a significant loan from the National Commercial Bank (BKT).

In August 2018, BKT approved a loan of up to 9.5 billion lek to the company “Gjoka 87”, however, in fact it has not been disbursed up to the maximum amount foreseen. According to the financial statements of “Gjoka 87”, the maximum liability to the bank has reached the amount of 4.4 billion lek, in 2022.

In 2017, BKT also approved a loan of 28.5 million euros to "Albania Highway Concession", the company that is implementing the concession contract for the completion and maintenance of the National Road.

In the case of PPPs, the Albanian government does not provide sovereign guarantees, so banks must assume the credit risk themselves. Despite this, the banking sector has already provided significant financing for PPP infrastructure projects./ Monitor