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Individuals take more loans, leave bonds and bonds as collateral

2024-11-04 10:36:00Biznes SHKRUAR NGA REDAKSIA VOX

Individuals take more loans, leave bonds and bonds as collateral

The use of government bonds and bonds as collateral for bank loans is increasing for the fourth year in a row.

Data from the Financial Supervision Authority (AMF) show that for the 9th month of 2024, the value of government debt securities placed as collateral for bank loans reached 1.43 billion ALL, an increase of 37% compared to the previous year.

The use of debt securities as collateral for loans is dominated by individuals, with a total value of 1.25 billion ALL. This value was 232% higher compared to the same period of the previous year. Meanwhile, in the business segment, the value of placing bonds as collateral fell to 181 million ALL, 73% less compared to a year ago.

In the number of transactions, government bonds were placed as collateral in 363 cases, this figure is 585% higher compared to the previous year.

AMF data show that there are mainly three commercial banks that have accepted government securities as collateral, Raiffeisen Bank Albania, Credins Bank and Banka OTP Albania.

Government bonds offer several advantages to banks over other widely used types of collateral, primarily real estate. Financial securities are more liquid and easier to value compared to other types of assets.

Execution procedures, in cases of non-payment of obligations, are faster and less expensive compared to other types of collateral or guarantees offered. This is generally reflected in lower interest rates for loans secured by treasury bills and bonds.

Although in general collateral in the form of bonds or bonds is a guarantee that offers advantages for banks, thanks to low risk and high liquidity, according to banking sector experts, securing loans with this type of collateral also has some problems.

One of them is related to the market value of the title offered as collateral. If, at the time of execution of the property, the indicated value has fallen below the value of the customer's obligation to the Bank, then a part of the obligation may remain unpaid.

However, to avoid this problem, in addition to the coverage coefficient slightly higher than the loan value, the Bank also performs periodic checks of the market values ​​of the title collaterals. The bank has the right to ask the customer to increase the value of the collateral when it finds that the value of the collateral provided has fallen below the permissible limit.

According to the bankers, the issues that require improvement are the possibility of registering the blocking of the title in favor of the bank in the lists of the title register at the Bank of Albania or the possibility of blocking and registering the transfer of title ownership in favor of the lending bank, in cases when other banks are custodians of titles left as collateral./Monitor


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