Non-Performing Loans and Their Bank Specific Determinants, Case of Albania

Abstract

Albanian economy and banking system is going through rough times with the non-performing loans issue. The “boom” of total loans that happened in Albania in such a short time is not a common phenomenon and now it is manifesting its consequences, listing Albania as one of the countries with the highest NPL level. This research will analyze the level of regression for each effected hypothesis that has been discussed by many researchers. The study will be based on researches, interviews and bank periodic reports in order to evaluate the most effective factor among bank specific determinants. On the other side of the study, there will be underlined the process that bank apply to detect NPL, the model they apply to minimize and their internal decision making steps to manage the cases. In this paper will be analyzed the relationship between microeconomic issues and other factors and loans problems in transition countries and in this case of Albania. From this analysis it appears that bank specific determinants plays an important role in Albania level of problem loans. The developed countries suggest improving the law and the creation of the framework of the central bank in reducing non-performing loans.