ALBANIAN BANKS SEE HIGHER WITHDRAWALS

C O N F I D E N T I A L TIRANA 000757 SIPDIS DEPT FOR EUR/SCE JISMAIL, TREASURY FOR VIMAL ATUKORALA E.O. 12958: DECL: 10/16/2018 TAGS: EFIN ECON PGOV AL SUBJECT: ALBANIAN BANKS SEE HIGHER WITHDRAWALS Classified By: POLECON Chief Paul Poletes, reasons 1.4 (b),(d) ¶1. (C) Albania seems to be weathering the global credit crunch better than many Western countries but there are signs of potential problems. Recently, the Ministry of Finance postponed a Eurobond offering, originally scheduled for late spring, due to turbulence in the credit markets and the possible additional risk due to national elections next summer. The Eurobond would have been the first one issued by Albania. ¶2. (C) Although official statistics for September have not yet been released, some bankers are saying that private depositors have been withdrawing their savings at an increasing rate. According to the Central Bank's Director of Financial Stability, the CB is monitoring the situation closely, but considers the activity, which does not seem to be affecting corporate accounts, normal considering the turmoil in the global financial markets. The withdrawals seem to be an emotional reaction to media reports of weaknesses in global credit markets rather than any specific problem with Albanian banks. The CB has also offered additional liquidity to commercial banks as needed, but so far has not received any requests. The banking system is further protected by legislation preventing foreign-owned banks from moving deposits out of Albania. ¶3. (C) COMMENT: If world stock markets begin to stabilize and media reports turn more optimistic, the withdrawals will likely decelerate. Albania's credit markets are still quite small, with loans at 53 percent of deposits compared to 140 and 160 percent in the UK and US respectively. However, the Albanian economy is strongly dependent on remittances, which may decline as workers in Western countries feel more economic pressure and send less money home. This may lead to a possible slowdown in the Albanian economy, although there are no specific signs yet. In addition, Albanian depositors are generally skittish, and further financial troubles abroad could well lead to further panicky withdrawals as customers eschew banks for mattresses in hopes of riding out the storm. WITHERS