How much were loans affected by the depreciation of the euro? - BoA: The quality of loans in foreign currency not hedged by the exchange rate has improved
The quality of foreign currency loans unhedged from exchange rate fluctuations improved in the second half of last year.
Borrowing in foreign currency is slightly more sensitive than borrowing in lek, due to the risk posed by exchange rate fluctuations. Loans not protected by exchange rate are those loans taken in a foreign currency (usually the euro), from entities that do not have income in the same currency. This means that in the event of a depreciation of the lek, the payment of installments becomes more expensive, increasing the financial burden for borrowers.
The Financial Stability Report of the Bank of Albania shows that compared to the end of the first half of the year and a year earlier, the stock of unsecured loans was 6% and 2% lower in the second half of 2025. The contraction of the unsecured loan portfolio has caused its weight in relation to total loans and foreign currency loans to fall to 9% and 21%, respectively.
This performance of unsecured credit indicates a decrease in the banking sector's exposure to indirect exchange rate risk and represents a positive development both in terms of borrower protection and in terms of banking sector sustainability.
The largest share of unsecured foreign currency loans is represented by real estate loans (67%) and trade loans (14%). Despite the fact that the largest share of unsecured real estate loans is held by individuals, the 12% increase in this portfolio during the period came from the increase in real estate investment loans for businesses, and this development may require increased caution by banks, the Bank of Albania states.
The ratio of non-performing loans to loans not hedged by exchange rate was 3.8% at the end of the year, not showing much change from the previous period.
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