The Impact of Macro-Economic Factors on Non-Performing Loans in Albania

Albania's banking system has made great progress, especially in recent decades. In the last five years the economy has had many important changes, with regard to financial sustainability in Albania. Our country is going through a difficult moment and the Albanian banking system is characterized by high levels of non-performing loans. Our banking system has several problems and the authorities are not giving the proper solution and the implementation of these solutions is taking too much time, thing that aggravates even further the current situation. Our hypothesis in this paper is: despite the totality of all the macroeconomic factors that influence in a country, the main factor that had a negative impact on the high level of nonperforming loans in Albania is the gross domestic product. To prove this hypothesis, we used two methods, the first one is the linear regression and the other one is stress tests. Besides that, we have referred to the most recent literature and see also the experience of other countries. The same methods were also used by other authors both foreign and Albanian such as (2004), Vlieghe (2001) Shijaku & Czech (2010) etc. Meanwhile, we have also analyzed the internal factors which had an impact on the portfolio of non-performing loans in commercial banks in Albania, highlighting the impact of the professional analysts of credit, the implementation of procedures and manuals from banks, corruption, the rapid growth of the non-performing loans during 2007-08 etc.