The results of the Bank of Albania’s periodic stress tests show that the banking sector’s ability to withstand potential shocks has been further strengthened, and the need for additional capital, even in the most severe scenarios, has decreased.

The capital adequacy stress test shows the degree of resilience of individual banks and aims to highlight the sector’s ability to withstand assumed shocks on economic growth and unemployment, exchange rate performance, loan portfolio volume and quality, interest rate levels, and non-financial asset price performance.

The exercise is built on three scenarios: the baseline, the moderate, and the severe scenario, and the exercise period extends until the end of 2026.

The baseline scenario assumes positive economic growth during this period, which is accompanied by a positive increase in lending, appreciation of the domestic currency, and a decrease in unemployment. In the moderate scenario, economic growth remains in positive territory during the exercise period, but the growth rate is lower compared to the baseline scenario.

Whereas, in the severe scenario, starting from the third quarter of 2026, the economic growth rate is assumed to be negative.

In terms of capital adequacy, the results of the stress test exercise show that in the baseline scenario, the capital adequacy ratio (the ratio between regulatory capital and risk-bearing assets) of the banking sector is estimated at around 23% by the end of 2026. These developments indicate stability and good levels of capitalization of the entire banking sector. Banks do not need capital injections in this scenario.

In the moderate scenario, the capital adequacy ratio for the banking sector falls to around 22% at the end of 2026, continuing to maintain good levels throughout the exercise period. In this scenario, only one of the banks in the sector needs capital injections, and the weight of its assets in the banking sector assets reaches around 2.3%. In this case, the capital injection needs are estimated at around 180 million lek, or around 0.01% of GDP.

In the severe scenario, the banking sector remains well-capitalized until the end of 2026, with a capital adequacy ratio of around 21%. In this case, the number of banks in need of capital injection reaches three, and the weight of their assets in the banking sector assets reaches around 21%. In this case, the needs for additional capital are estimated to be around 4.4 billion lek or 0.2% of GDP.

In this scenario, for systemically important and non-systemically important banks, the capital adequacy ratio reaches 21.6% and 19.3%, respectively. The group of banks with foreign capital presents a capitalization level of around 23%, remaining well-capitalized, while the group of banks with domestic capital has a lower ratio of around 17%. The main contribution to the decline in capitalization in the severe scenario at the end of 2026 is made by the item “Loan losses” and the decline in “Other income”.

The results show that, despite the sensitivity of individual banks, the banking sector appears resilient to macroeconomic shocks, and its resilience to adverse developments is stronger than a year ago. The number of banks that present a need for capital increase in the most extreme scenario is three, compared to four banks that resulted a year ago. As a result, additional capital needs are also estimated to have decreased to 0.2% of GDP, from 0.34% a year earlier.