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Montenegro and Albania have the highest levels of non-performing loans in the Region

Politiko 2025-07-11 13:54:19

Montenegro and Albania have the highest levels of non-performing loans in the

Despite the continuous downward trend over recent years, Albania still continues to have one of the highest non-performing loans ratios in the Western Balkans Region.

Comparative data from the Vienna Initiative, a project of the European Bank for Reconstruction and Development (EBRD), dates back to the end of last year, when the non-performing loan ratio for the Albanian banking sector at the end of last year was at 4.17%. Compared to a year earlier, the non-performing loan ratio in Albania improved by about 0.6 percentage points compared to a year earlier.

Based on Vienna Initiative data for the region, the country with the highest NPL ratio at the end of 2024 was Montenegro, at 4.7%. The NPL ratio in Montenegro has also declined, by about one percentage point compared to the previous year.

Montenegro, together with Albania, had the highest levels of non-performing loans ratio in the period following the 2008 financial crisis. Despite the gradual decrease, especially after 2017, Montenegro and Albania still continue to have the highest levels of this indicator compared to other countries in this region.

After Albania, Bosnia and Herzegovina follows, with a non-performing loan ratio of 3.2%, followed by North Macedonia, with 2.6%, Serbia, with 2.5% and Kosovo, with 1.8%.

The non-performing loan ratio in Albania has been on a continuous decline since 2016. In the first phase, this decline was mainly due to the process of writing off bad loans, in accordance with regulatory requirements approved by the Bank of Albania. Meanwhile, in recent years, the decline has been driven mainly by the rapid growth of the loan portfolio for the economy and the relatively good state of the private sector balance sheets.

However, Albania still remains at the highest levels in the region in terms of the non-performing loans indicator. On the other hand, in the first half of this year, there was an increase in the stock of non-performing loans, while their ratio has not suffered a significant decline since the end of last year.

The Bank of Albania has repeatedly expressed concern about the rapid growth of lending, especially in the real estate segment. Since last year, the Central Bank decided to apply a countercyclical capital surcharge for commercial banks. This surcharge has reached the level of 0.5% (to be met from December 31, 2025), while the Central Bank has recently announced its further increase.

The countercyclical capital requirement is specifically aimed at slowing down lending by the banking sector, in cases where the Bank of Albania judges that we are in conditions of excessively rapid growth.

In addition to the increased capital requirements, since July, special restrictive measures have also been applied to home loan applications, through the imposition of certain restrictions on specific risk management indicators. These measures are intended to particularly restrict the taking of a second loan for the purchase of real estate. / Monitor

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