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Albanian banking sector and the challenges of adopting Basel II

Author

Listed:
  • Kufo Andromahi

    () (University of New York, Tirana, Albania)

  • Kripa Dorina

    (University of Tirana, Albania)

Abstract

The Albanian banking sector is already facing the challenge of adopting the Basel II international standards with the aim of applying all the necessary requirements on the calculation and reporting of the regulatory capital by the end of 2014. These developments require major preparation from the banks in order to understand, assimilate and implement the new requirements. This paper aims to analyze the challenges and opportunities of the Albanian banking sector in implementing these new requirements. Initially we will define the theoretical context of the requirements of Basel I, II and III as well as the literature review of the basic challenges that Basel II created for developed and emerging countries. In continuance it will be presented a comparative analysis of the requirements of Basel II with the actual Albanian regulatory framework with a special focus on the compliance of the legislation and gaps identified. We point out the fact that Albania as an emerging country is in the process of implementing a hybrid of Basel I and II, since the regulator considers it more suitable with the actual financial situation and the banking sector structure. With reference to the above the Albanian banking sector needs to identify the methods of value maximization from the implementation of this framework and to successfully manage the restrictions it has for implementing it up to the end of 2014. Finally in the aim of identifying all the challenges and opportunities of this process, we'll analyze the major factors that will affect the banking sector with a special mention to the requirements of the regulatory capital.

Suggested Citation

  • Kufo Andromahi & Kripa Dorina, 2015. "Albanian banking sector and the challenges of adopting Basel II," Review of Applied Socio-Economic Research, Pro Global Science Association, vol. 9(1), pages 4-14, June.
  • Handle: RePEc:rse:wpaper:v:9:y:2015:i:1:p:4-14
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    References listed on IDEAS

    as
    1. Heid, Frank, 2007. "The cyclical effects of the Basel II capital requirements," Journal of Banking & Finance, Elsevier, vol. 31(12), pages 3885-3900, December.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Basel; regulatory capital; Albanian banking sector; regulator;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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