Government Participation in Bad Debts Resolution; Case of Kosovo and Albania

Banks need to make thorough analysis and take into consideration all the potential risks that arise related to their lending, preventing bad loans mostly during economic slowdown. The Non-Performing Loans (now on referred as NPL) in Kosovo continued falling from 8.7% as it was in 2013 to 8.3% in 2014. While in 2014 NPL level decreased, the provisioning for loans continued to increase from 110.5% to 114.4%. This is a positive toward any unexpected situation. Lost loans have continued to increase in moderated way for the last four years. Banking Sector in Albania since the last economic recession entered into third period of development which shows huge problems with high NPL ratio, credit shrink, lower banks’ profitability and intensive attempts to introduce stabilizing mechanisms. NPL ratio was the highest in South East Europe Countries (now on referred as SEEC) region, number of outstanding loans tended to decrease such as profit in banking sectors. As a response to highest NPL ratio compared to world level, Kosovo authority has set only guidelines for restructuring and monitoring the process of regularity. This provides banks with a wide range of autonomy in the procedures of restructuring. Authority in Albania has been active in the process of normalizing the system. In 2013 has introduced the guideline on corporate loan restructuring. The guideline promotes 12 principles