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The banking sector has invested nearly 1.1 billion euros in Albanian government Eurobonds

2026-02-19 07:32:00, Ekonomi CNA

The banking sector has invested nearly 1.1 billion euros in Albanian government

The banking sector further increased investment in Albanian government Eurobonds during 2025. Bank of Albania data show that Albanian government foreign currency securities on the banking sector balance sheet at the end of 2025 reached the value of 103.2 billion lek or approximately 1.07 billion euros (at the exchange rate of the last day of last year).

Compared to the end of 2024, the value of these assets has increased by 11.5%. However, if we strip the increase from the effect of the exchange rate, it would result even slightly higher. The Euro-Lek exchange rate closed 2025 at the level of 96.77 Lek. This is the lowest historical rate recorded at the end of the calendar year and close to the all-time historical minimum level of 96.46 Lek, recorded just one week before the end of 2025.

Compared to the end of 2024, the Euro/Lek exchange rate on December 31st has decreased by 1.4%. The specific weight of Albanian government Eurobonds in the banking sector balance sheet has increased slightly, to 4.4% of assets from 4.3% a year earlier.

Meanwhile, including debt securities in lek, the total exposure of the banking sector to the Albanian government accounted for 26.9% of the total value of assets, down slightly from 27.1% a year earlier. Foreign currency debt instruments of the Albanian government have attracted increasing interest from the Albanian banking sector in recent years. Investment in these instruments has offered satisfactory returns, during a period when interest rates for the euro have been very low.

Investment in Eurobonds in some of their issues has also been favored by the temporary easing conditions provided by the Bank of Albania, which has allowed banks to weight these investments with a lower risk coefficient, compared to the standard levels required by the regulatory framework, for the purpose of calculating the capital adequacy ratio.

The high growth of foreign currency deposits in recent years has created significant amounts of free liquidity for banks. At the end of 2025, deposits in the European currency reached a record figure of 8.75 billion euros, up 8.7% compared to the previous year.

On the other hand, the regulatory framework of the Bank of Albania tends to make foreign currency lending more costly for entities with income in Lek, which limits the scope for increasing euro credit for the Albanian private sector. In this way, Eurobonds in recent years have also served as an instrument for absorbing free foreign currency liquidity in the banking sector.

Considering that the entire issued and outstanding stock of Albanian Eurobonds at the end of 2025 was around 2.55 billion euros, it can be calculated that the banking sector owned approximately 42% of their entire portfolio. /Monitor