The fall in the exchange rate of the euro with the lek continues to hurt the size of the balance sheet of the banking sector.

According to the Bank of Albania, in the middle of this year, the strengthening of the lek had a negative effect of about Lek 28 billion on the total assets of the banking sector, compared to a year ago. On the asset side, the strengthening of the local currency has had a greater impact on the main balance sheet items such as actions with securities, actions with treasury, and interbank.

On the liability side, the effect of the exchange rate on the reported value of foreign currency deposits is estimated at around Lek 21 billion. The statistical decreasing effect of the exchange rate has also been felt for the foreign currency part of the capital of the banking sector, for a value of about Lek 15 billion.

At the end of June 2024, the euro-lek exchange rate dropped to the level of Lek 100.3, from Lek 106.4 in the same period a year ago. The 5.8% drop in the euro exchange rate has consequently continued to be reflected in a contraction in the value of foreign currency assets in the banking sector.

In annual terms, foreign currency assets and liabilities increased by 4% each, but corrected for the effect of exchange rate changes, these growth rates are calculated at 9% and 10%, respectively.

The weight of assets and liabilities in foreign currency to the total balance has marked a slight decrease compared to a year ago. At the end of the period, the banking sector's assets and liabilities in foreign currency accounted for 50% and 49% of the total balance, respectively. In terms of foreign currency assets, the items with the greatest weight are investments in loans and those in government securities. In terms of liabilities in foreign currency, the structure is more stable over the years and is dominated by foreign currency deposits. The above items have largely determined the limited sensitivity of the banking sector to changes in the exchange rate.

Bank of Albania statistics show that the total assets of the banking sector in the middle of this year were Lek 2.03 trillion, increasing by 7.2% (Lek 136 billion) compared to the previous year. The main contribution to the growth of assets was given by the expansion of lending activity by 11.3% (Lek 85 billion) and of investments in securities by 9.3% (Lek 68 billion).

According to the estimates of the Bank of Albania, in the middle of this year, the assets of the banking sector constituted about 85% of the Gross Domestic Product.