Fibank Albania Annual Report 2019 083685f7fd

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The document discusses Fibank Albania's annual report for 2019 and provides information about its financial performance, business growth, and challenges.

The document states that Fibank activity increased by more than 25% in total assets, loans, and deposits in 2019, which was probably the highest growth rate in the Albanian banking system.

The document mentions that Fibank's financial performance in 2019 was very good, approaching a net profit of EUR 4 million, continuing its positive trend from recent years.

TABLE OF CONTENTS

9 The Banking System


12 Bank Profile
12 Corporate Status
12 Participations and Memberships
12 Correspondent Relations
13 Branch Network
19 First Investment Bank: Dates and Facts
16 Highlights 2019
22 Key Indicators
23 Financial Results
28 Loans
30 Related Party Transactions
30 Commitments and Contingent Liabilities
31 Attracted Funds
34 Internal audit
34 Risk Management
34 Risk Management Framework
35 Credit Risk
35 Market Risk
36 Liquidity Risk
36 Internal Capital Adequacy Analysis
37 Operational Risk
40 Information Technologies
41 Corporate Governance
41 Human Capital
43 Branch network
44 Steering Council
50 Business Overview
51 Deposits
52 Retail Lending
53 SME Lending
55 Gold and Commemorative Coins
56 Payment Services
56 Compliance and AML
56 Depositary and Custodian Services
58 Financial Statements for the year ended 31 December 2019
(with independent auditors’ report thereon)
THE Annual Report FIBANK ALBANIA /2019 4

Message from the CEO


THE Annual Report FIBANK ALBANIA /2019 5

BOZHIDAR TODOROV
Chief Executive Officer

Dear Shareholders, Partners and Employees,

It was another positive year for Fibank Albania. Fibank activity increased
with more than 25% in the main components, total assets, loans and
deposits, probably highest growth rate in the Albanian Banking system,
contributing in an increase of our market share. Financial performance will
be again very good and in the same pace of the recent years, approaching
net profit of EUR 4 mil.

We opened new branches in the beginning of 2019, at a time when other


banks were shrinking their network and we had a staff increase of more
than 20% showing our strong dedication to business growth and further
developments.
The orientation toward clients is our continuous focus and the important
survey we conducted during this year about Customer Satisfaction in our
network, showed an excellent indicator of our Net Promoters Call, a high
level considering also international practices.

The year 2020 will come with new challenges that need to be tackled
wisely. Improving the conditions of doing business is an area where we can
work on. This will help companies to be more competitive in the national
and international market and this will also help banks to perform much
better. Our banking system is continuing to have the challenge of
informality. Measures to solve this issue are also needed. Justice reform is
another tool of the government that will help all the systems to perform in
better conditions and bring more prosperity to the country.

During the year ahead Fibank aims to continue the positive trend of
influencing the country welfare by improving people’s lives as staff, as
customers and as citizens. We will continue to exploit opportunities in the
market with our dedication to business development, new products and
services tailor made as per the current requirements and supported by a
strongly motivated team of professionals.
THE Annual Report FIBANK ALBANIA /2019 6

Macroeconomic Development
Economic growth during 2019, although affected by November 2019 earthquake, remained
positive and is assessed as broad-based, hence providing further fall in unemployment rate
and supporting overall positive developments in the balance of payments, driven by the good
performance of tourism sector and the stability of remittances. The consolidation trend of fiscal
policy was useful to ensure a necessary correction for withstanding the short-term effects of
the earthquake.
By the end of the 11-month period, budget deficit totaled around ALL 10.6 billion, from ALL 0.9
billion in the same period in the previous year. Deficit financing sources during 2019 were
domestic, the use of which beyond the budget deficit has led to the reduction of government
external debt by about ALL 10.4 billion by the end of the 11-month period.
Budget expenditures, in October and November, increased by around 2.1% in annual terms, at
a slower pace than the average 6.4% registered for the first three quarters of the year. The
slowdown in the growth pace of expenditures, in these two months, was defined by lower
expenses for domestic and foreign debt interests. On the other hand, the decline of
expenditures for domestic debt interests is due to the continuous decrease of the interest rates
of government securities issued in the domestic market.
Real trade deficit in goods and services contracted by 19.1% in 2019 Q3. This performance is
in contrast with 2019 H1, where the deficit expanded by 9.6%. The main driver of this
development has been the rapid increase of export of services (by around 13.0%).
The exports of goods in value declined by about 6.7% in annual level during 2019 Q4, a faster
rate compared with the previous quarter (0.9%). Categories “Textile and footwear” and
“Construction materials and metals” have generated the main impacts on this dynamic.
Electricity trade continued to remain a significant factor in the dynamic of exports, but with
lower impacts compared with the previous quarters.
Imports of goods decreased by 3.8% during 2019 Q4. The downward import performance has
been defined by the categories “Construction materials and metals” and “Minerals, fuel,
electricity”. Overall, the dynamic of the other categories as well has been negative or quite
sluggish.
Employment in the economy increased by 3.3% in annual terms, a comparable rate to the
3.4% registered in the previous quarter. This increase continued to affect the further growth of
employment and the decline of the unemployment rate. This indicator declined at 11.4% in
2019 Q3, down by 0.8 percentage point compared with the same period in the previous year,
and registering the lowest historical level.
The gross monthly average salary per employee registered an annual increase of 3.7% in
2019 Q3, continuing the upward trend of 2019 H1. In real terms, the monthly average wage
increased by 2.3%, from 3.1% in the previous quarter.
In 2019 Q3, investments deepened the annual fall, 1.9% with a negative contribution to
economic growth of -0.4 percentage point. Indirect assessments show that private
investments determined the downward dynamic of investments. The latter, based on indirect
data from 2019 Q3, was affected by both investments in construction and investments in
machinery and equipment.
THE Annual Report FIBANK ALBANIA /2019 7
Main macroeconomic indicators

2019 2018 2017


Real GDP growth (annual, in %) 3.8 4.3 3.9
Industrial output (% yoy) 4.9 7.8 6
Producer prices (avg. % yoy) 2.21 2.83 2.01
Consumer prices (avg. % yoy) 1.9 1.8 2
Unemployment rate (15-64 years of age) 11.2 12.4 13.9
Budget Balance (including grants,% of (1.6) (1.6) (2)
GDP)
Budget revenues (% of GDP) 28.3 27.4 27.7
Budget expenditure (% of GDP) 28.9 29 29.7
Public debt (% of GDP) 63.63 67.2 70
Current account (excluding official (6.3) (5.7) _(8.1)
transfers, in % of GDP)
Imports of goods (fob, as a percentage of 36.7 29.4 31.3
GDP)
Exports of goods (fob, as a percentage of 6.7 7.7 6.9
GDP)
Foreign Direct Investments (% of GDP) 5.7 8 7.7
International reserve (in EUR million, end
3355 3399
of period) 2996

Sector's contribution in GDP 2019 (yoy growth)

Net Taxes 0.33%


Real estate activities 0.37%
Arts, entertainment and recreation -0.38%
Other services -0.29%
Financial activities 0.23%
Information 0.00%
Trade,Hotels & Restorants 0.43%
Construction -1.68%
Industry 1.06%
Agriculture -0.21%

-2.00% -1.50% -1.00% -0.50% 0.00% 0.50% 1.00% 1.50%

Sector's contribution in GDP 2019 (yoy growth)

Gross domestic product growth in %


In 2019 Q3, economic growth resulted at 3.8%, faster than the 2.5% growth in the first half of
the year. The expansion of the economic activity continued to be determined largely by the
services sector, mainly with increased contribution from tourism and continued trade support.
Also, the decline of the downward impact of low electricity output and the increase of the value
added in industry were reflected in positive contributions for economic growth. Meanwhile,
construction activity continued to show a slight downward dynamic similar with the previous
quarter.
THE Annual Report FIBANK ALBANIA /2019 8

In the fourth quarter, inflation averaged 1.3%, down from the previous quarter, and remaining
below our target of 3%. The decline in the inflation rate reflected the slower increase of food
prices. This phenomenon is particularly present in December. While, prices of other basket
items recorded less fluctuations.

Yearly changes of inflation 2019


2.00 1.9
1.7
1.5 1.5
1.4 1.4 1.4
1.50

1.3 1.3 1.3 1.1


IN %

1.00 1.1

0.50

0.00
Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19
THE Annual Report FIBANK ALBANIA /2019 11

The Banking System


Banking sector closed the year with a higher rate of profitability than in the previous year, with RoA
and RoE standing at 1.5% and 13.5%, respectively. Financial result was notably affected by the
expansion of profit from financial instruments, while net interest income, which dominate the
banking activity income, fell by 4.8%. As a result, net interest margin dropped to 3.4% at the end of
the period from 3.7% a year earlier. Although capital adequacy ratio fell by 0.2 percentage point
during the period, its 18.3% level is assessed as rather good.
Interest rates on new loans to the private sector continued to hover near their lowest levels, both for
lek and euro loans.
The average interest rate on new loans in lek was 6.3% in 2019 Q4, remaining the same as the two
previous quarters’ average. The interest rate of loans to enterprises was stable at 6.1%, reflecting
slightly lower interest rates rate for liquidity financing loans and a marginal increase of loans rate for
investment financing. Households continued to receive mortgage loans at low interest rate, whilst
interest rates on consumer loans increased in this quarter
Average interest rate for new loans in euro to the private sector was 4.2% in the fourth quarter,
slightly up compared to the previous quarter (4.0), but remaining near the average level of the last
two years. The growth of this quarter is mainly driven by the increase in the rates of loans for
investments granted to enterprises, while interest rates on loans for liquidity to enterprises and to
households changed to a negligible extent. The spread between interest rates on lek and euro
loans remains at low levels of about 2.0 percentage points for enterprises, 3.0 percentage points for
households and almost zero for mortgage loans.
The general terms and conditions of loans to households did not change in the last quarter of the
year. Thus, commissions, loan size, collateral requirement in relation to the loan received, and
terms of the loan agreement, as well as the maximum loan maturity remained the same as in the
previous quarter.
The financing costs for the banking activity through deposits remain low, thus supporting low
interest rates on loans. The average interest rate on new time deposits in lek stands at 0.76% in
2019 Q4, close to the levels of the two previous quarters and slightly below the average of the
previous year.
Interest rates on time deposits of up to one year, which make up the majority of time deposits have
been stable, while rates for deposits with higher maturities have been downward for several
quarters. The average interest rate on new time deposits in euro was 0.14% in this quarter, close
to its average in the last two years. The spread between the interest rate on Lek and Euro deposits
is minimal, by 0.7 percentage point during 2019.
The growth rates of banks financing to the private sector improved in the fourth quarter, averagely
at 7.8% or 0.3 percentage point higher compared to the previous quarter. Credit to GDP ratio also
increased, reaching 36.5% or 1.2 percentage points higher compared to the previous year.
Positive developments in the lending activity were supported by the easing of credit supply and the
structural improvements that have taken place in the banking sector during 2019.
THE Annual Report FIBANK ALBANIA /2019 12
Banking system indicators
Yearly
in% p.p 2019 2018 2017 2016 2015
Change in%
Capital adequacy ratio 18.28 18.24 16.6 15.7 16.04 0.04
Loans/ deposits 48.25 46.23 51.54 51.8 52 (0.95)
Leverage ratio (equity/assets) 10.45 11.06 10.16 9.72 11.9 0.30
Return-on-equity (ROE) 13.45 12.96 15.7 7.2 13.16 0.49
Return-on-assets (ROA) 1.49 1.2 1.5 0.7 1.2 0.29
Efficiency ratio 54.62 52.32 50.72 50.42 63.43 2.30
Problem loans (90 days past
due) 8.40 11.08 13.2 18.3 18.2 2.68
Source: Bank of Albania

During the period, credit portfolio quality continued to improve. As a result, non-performing loans
ratio dropped to 8.4%, for the first time at a one-figure level during the last decade. Repayments
write offs and restructuring provided their contribution in the fall of nonperforming loans. The write-
off of nonperforming loans have re-started after the regulatory amendments set forth by the Bank of
Albania, to shorten to two years the classification time of the loan classified as "lost" beyond of
which the bank should write-off the loan from the balance sheet. The improvement of credit quality
is mainly noted in; credit portfolio to enterprises; credit in foreign currency; and credit with longer-
term maturity.
Yearly
In ALL million 2019 2018 2017 2016 2015
Change in
Net interest income 41,656 43,772 44,201 44,569 46,490 (4.83)
Net fee, commission & trading
income 13,338 (356) 2,012 8,928 6,465 (3,843.38)
Impairments (83) (7,011) (8,762) 10,843 4,837 (98.81)
Administrative, taxes & other 33,664 33,711 33,243 32,736 31,712 (0.14)
expenses
Net profit 19,895 18,391 22,074 9,270 15,728 8.18

Deposits of both households and enterprise sectors at banks were risen. The expansion of
households' deposits was around 6 times higher than enterprises. The growth of households'
deposits, mainly in foreign currency, reflected also the fall in their holdings of securities. According
to the regular surveys of the Bank of Albania, the share of households having a debt to repay is
relatively low (24%), and the debt burden is estimated at affordable levels. For the next period,
households appear more ready to increase the borrowing level. Also for enterprises, debt burden is
estimated at appropriate levels given that the value of debt amounts to half the value of capital for
78% of enterprises, and almost 67% of them declare that the repayment of debt does not exceed
20% of the activity income. The debt burden is higher for small enterprises. Also, enterprises show
a higher readiness to increase the borrowing level in the next period.

Yearly
In ALL million 2019 2018 2017 2016 2015 Change
in%

Assets 1,475,551 1,452,926 1,445,330 1,407,286 1,317,843 1.56

Business loans 388,912 405,592 422,874 431,700 388,783 (1.79)

Household loans 186,833 175,095 178,001 168,667 154,561 1.15


Deposits from private
sector 190,132 202,843 195,302 191,860 163,755 (6.27)
THE Annual Report FIBANK ALBANIA /2019 13
During the period financial system activity expanded by around 2.6 percentage points, up to 107%
of the Gross Domestic Product. Lending and placements provided positive contribution in this
performance, mainly the activity of investments in securities. Credit grew during the period, and
over 2019 it expanded by 4.8% driven by lending to enterprises, credit in Lek and long-term credit.
Deposits grew 5.4% during the year driven by households' deposits, demand deposits and foreign
currency denominated deposits.
Demand for loans is not stable yet - after rising for two consecutive quarters, it decreased.
The domestic currency (lek) depreciated in 2019 Q4, following the appreciation in the two previous
quarters, which coincided with a good tourist season. The average exchange rate was 122.7
lek/euro in this quarter, with a lek depreciation of 0.9% compared to the previous quarter. Lek
continues its appreciation against the euro, compared to the previous year, although at a lesser
extent. Lek appreciation slowed down considerably, dropping at 1.4%in the last quarter of the year,
from 3.4% in the two previous quarters, and from 5.9% in the first quarter of the year.

Banking system
Assets structure 2019
Cash& balances with central bank

4.9% 0.7% Fixed assets


8.7%
10.3% Loans and advances to banks and
fin instit
29.1%
Loans and advances to other
customers
Financial instruments portofolio
46.2%
Other

In the total assets of the banking system, loans and advances to customers have the biggest share
with 46.2%; followed by investments in financial instruments with 29.1% and loans and advances to
banks and financial institutions with 10.3%. This indicates the high capacity to credit the economy
and the capability to grow of the banking system.

Mission
First Investment Bank, Albania Sha aims to be one of the top 10 banks in Albania and in the region
that is known for a fast-growing, innovative, customer oriented that delivers products and quality
services, to find excellent opportunities to develop their employees and contribute to friends.
Our vision is that good leadership, employee interaction; innovation, high – tech solutions and
flexibility allow us to better serve our customers, partners and attract intellectual capital and
increase our shareholder value.

Positive Development
In 2018, Fibank Albania continued to successfully overcome the challenges of the external and
internal market factors and reported enhanced results. During the last year, Fibank expanded its
activity with significant rates. From all Bank indicators, 2019 performance was the most successful
year where Fibank Albania showed a consistent increase on its main financial figures. This success
was thanks to the strategic decisions and implemented measures from Fibank Management to
maintain a balance between risk and profitability, as well as reinforce our high-quality products and
services while providing a flexible business model.
THE Annual Report FIBANK ALBANIA /2019 14
THE Annual Report FIBANK ALBANIA /2019 15

Bank Profile
Corporate Status
First Investment Bank (Fibank Albania) is a successor of the foreign branch of First Investment
Bank AD, Tirana Branch which has started operating in the Albanian Market since 1999. Fibank is a
subsidiary of First Investment Bank A.D. an entity incorporated in Bulgaria as a credit institution
which owns 100% of the Bank’s shares.
Fibank Albania – was issued a general banking license from the Bank of Albania, on July 6th 2007.
This license allowed Fibank to carry out all bank transactions in accordance to the Albanian
legislation in force and absorbed all the activity of First Investment Bank AD, Tirana Branch. By
obtaining a full license Fibank Management Albania launched:
Branch expansion
Full range of SME and Retail products
Fibank is the first bank to be licensed by the Albanian Financial Supervisory Authority entitled to
carry out depositary, custodian and brokerage services.
In execution of the obligations resulting from Regulation (ЕС) № 648/2012 of the European
Parliament and of the Counsel on OTC derivatives, central counterparties and trade repositories
(EMIR), the Bank has a LEI code (Legal Entity Identifier): 529900TCJ9K2BDH3TR75 issued by
Global Markets Entity Identifier (GMEI) Utility.
Fibank Albania Sh.a is FATCA compliant institution under status “Registered Deemed-Compliant
Foreign Financial Institution”. The Global Intermediary Identification Number (GIIN) of the Bank is:
SP7FU7.00001.ME.008.
First Investment Bank – Albania incorporated in the Republic of Albania is a joint stock company
established on August 1st 2005 and has its registered office in Tirana, Blvd. “Dëshmorët e Kombit”,
Twin Towers, Tower 2, 14th-15th Floor.

Participations and Memberships


Albanian Association of Banks
Albanian Foreign Investors Association
Bulgarian-Albanian Chamber of Commerce and Industry

Correspondent Relations
Fibank Albania has a network of 3 correspondent banks, through which it performs international
payments and trade finance operations. The Bank executes international transfers in three foreign
currencies and performs different documentary operations.
Fibank is a reliable and fair partner, which has built over the years a good reputation among
international financial institutions and gained valuable experience and know-how from its business
partners, customers and counterparties.

Branch Network
Branch network at 31 December 2019 had a total of 1 branch and 13 agencies and Head Office.
The agencies are located in Durrës, Fier, Vlorë, Elbasan, Korçë, Shkodër, Berat, Lezhë, Lushnje,
Sarandë as well as in Tirana where is also the Head Office.
THE Annual Report FIBANK ALBANIA /2019 14

First Investment
Bank: Dates and
Facts
THE Annual Report FIBANK ALBANIA /2019 15

1999 First Investment Bank AD opens a Branch in Tirana.

2007 First Investment Bank Albania receives a license from Bank of Albania as an independent Albanian bank, with its mother
bank in Bulgaria.
Opens three new branches in Elbasan, Vlora and Korca adding them to the existing branches in Tirana and Durres.
Launches a wide range of innovative banking products for all customer groups aiming to penetrate the market through
specific and interesting offers.
Branch network grows with other branches in Fier, Shkodra and Berat aiming to be present in the main cities by offering
2008
dedicated products and services to individual customers as well as businesses located in these cities.

Fibank assets increased by 77%, investment by 200% while deposits showed an increase by 160%.
2009

2010 Fibank Albania was licensed by Financial Supervisory Authority;


To exercise intermediary activity (broker / dealer) in the securities of the Government of the Republic of Albania in stock
exchange and the retail market. Custodian of securities of the Government of the Republic of Albania. Depository of
Voluntary Pension Funds, with responsibility for safekeeping of the assets, operations and documents of the pension
fund or investment fund. Fibank is the 6th bank licensed in the Albanian market.
Increase on investments reached 370%, in deposits 75% and in loans 99%.
Fibank Albania was licensed by Financial Supervisory Authority;

To act as Depository of Voluntary Pension Funds and Collective investment undertakings with responsibility for safekeeping
2011 of the assets, operations and documents of the investment fund.
Continued the increase on main bank performance indicators, loans to customers and deposits with around 30%.

First in terms of growth rate in the Albanian banking system. Net profit showed a positive result of EUR 700 thousand.
Assets reached to EUR 96 million at the end of the year with a capital adequacy ratio of 16.6% and a liquidity ratio of 38.6%.
2012
In October 2010 and in February 2012 Fibank Albania signed the agreement with Raiffeisen Invest Fund, the biggest
investment fund company in Albania and the only company in the country that manages the collective investment
2010-2012 undertakings. Actually, FIBank Albania is acting as depositary of five investment and pension funds, four of which are
managed from Raiffeisen Invest Albania and one from WVP Management Tirana.

Total assets reached EUR 120 million, and deposits exceeded EUR 100 million as well. Continued to increase net profit
to approximately of EUR 800 thousand.
2013

FIBank Albania was licensed by Financial Supervision Authority as Custodian of Corporate and Municipality Bonds.
2014 Actually, FIBank Albania is acting as custodian of two corporate bonds issued by Credins Bank and Digitalb SHA.

Fibank was honored with the award “Bank of the Year” for 2015 by Chamber of Commerce and Industry. Significant for this
2015 year was that net profit reached the highest value EUR 1.8 million since bank has been opened its first branch in April
1999.
Fibank marked a significant impact in corporate social responsibility activities supporting significant causes for Albania
2016 such as: You are a Sunflower Foundation, Down Syndrome Albania, Pensioner’s Union, social media activities by
increasing brand visibility and helping Fibank community.

Recorded best years in all performance indicators and in the last 2 years in total:
2017 • Loans increased with 83%;
• Total assets increased with 44%;
• Deposits increase with 42%;
• Net profit exceeded EUR 3 mil in each year;
Fibank Albania is assigned as Primary Dealer in Albanian Banking System. This way, Fibank is among 5 banks assigned
2018 as Primary Dealer for Albanian Government Bonds in a country where exercise their activity 14 banks. Fibank expanded
its network with three additional branches in the cities of Saranda, Lushnja and Lezha.
THE Annual Report FIBANK ALBANIA /2019 16

Ι Highlights 2019
THE Annual Report FIBANK ALBANIA /2019 17

Fibank Albania was assigned as Market Maker of benchmark


securities in the Albanian market in 2018. For the year 2019 the
bank has achieved:
46% of market share in primary market of benchmark securities;
42% of market share in secondary market trades of benchmark
securities;
34.4 million euros turnover of selling Securities in Albanian
secondary and retail market;
Fibank faced considerable increase of credit cards, with 132%
compared with 5 years ago and 37% compared with 2018.
The number of outgoing transfers in foreign currency ordered by
Fibank customers increased by around 40% compared to 2018.
Fibank started another big project – the Cash-in Project. The bank
purchased new ATM-s which allows not only for CASH withdrawals
but also CASH deposits to client’s accounts.
New Implementations in the Core Banking System, in the SIEM
System, upgrade of Domain Controllers.
Building up new IT governance Procedures and Policies
Web Proxy Internet security, Implementation of Cloudflare Service,
DigiCert Multidomain SSL certificate.
Hyper V Failover Cluster Servers Platform Upgrade
Together with Datamax, the bank developed and started using a
new Module for MoneyGram transfer.
THE Annual Report FIBANK ALBANIA /2019 18

January
Fibank opened a new branch in Tirana, located in Unaza e Re.

April
Fibank Albania issued the 7-year bond at the amount of 2 Million Euros.
Fibank Albania was the first bank which started issuing contactless cards
with the latest technology and the only bank that issues the card to the
customer within 24 hours. This upgrade was offered free of charge to
cardholders who embraced it by adopting daily purchases with this tap and pay
technology without entering PIN for amounts up to 4,500 ALL.
THE Annual Report FIBANK ALBANIA /2019 19

June
Fibank successfully implemented the Cash Denomination Module.

November
Fibank opened a second new branch in Tirana, located in in “Zogu I”
boulevard.
Successful Switchover of Core Banking Database Servers.

Fibank sponsored the first social center project for young parents and their
newborns called MamiCare, in Tirana.
THE Annual Report FIBANK ALBANIA /2019 20

December
Fibank Albania and Rural Credit Guarantee Foundation in Albania signed the
partnership agreement which aims to facilitate the lending process for micro,
small and medium-sized enterprises.
THE Annual Report FIBANK ALBANIA /2019 21
THE Annual Report FIBANK ALBANIA /2019 22

Key Indicators
2019 2018 2017 2016
Financial results (in ALL thousand)
Net interest income 938,325 976,478 834,931 763,608
Net fee and commission income 245,316 217,187 209,406 188,422
Net trading income 26,250 (106,151) (13,045) (12,894)
Total income from banking operations 1,379,012 1,131,058 1,082,070 973,722
Administrative expenses (676,748) (574,932) (484,518) (368,308)
Impairment (130,787) (71,880) (84,430) (89,608)
Profit after tax 482,480 401,032 435,676 363,088
Balance-sheet indicators (in ALL
thousand)
Assets 31,722,865 24,632,952 20,994,963 18,795,225
Loans and advances to customers 14,669,657 11,713,074 9,518,779 7,049,429
Loans and advances to banks and
financial institutions 3,279,997 2,448,132 1,859,013 1,791,915
Due to other customers 26,588,459 20,807,370 17,229,570 16,093,342
Equity 3,457,903 3,407,541 2,656,013 2,304,110
Key ratios (in %)
Capital adequacy ratio 17.06 17.35 17.39 18.13
Loans/ deposits 57.58 59.14 57.89 47.46
Liquidity ratio 59.79 55.43 44.61 47.55
Loan provisioning ratio 4.26 4.89 6.46 7.70
Net interest income/ Total income from
banking operations 68.04 86.33 77.16 78.42
Return on equity (after tax) 14.06 14.39 17.18 15.76
Return on assets (after tax) 1.71 1.79 2.20 1.93
Resources (in numbers)
Branches and offices 14 13 9 9
Staff 218 183 143 140
THE Annual Report FIBANK ALBANIA /2019 23

Financial Results
THE Annual Report FIBANK ALBANIA /2019 24

Financial results
In 2019 Fibank Albania reported profit after tax in the amount of ALL 482,480 thousand (2018: ALL
401,032 thousand; 2017: ALL 435,676 thousand). This was due to higher income from banking
operations, especially from an increase in net trading income and other operating income. Fibank
Albania ranked eighth in terms of profit among the banks in the country. Return on equity (after tax)
in 2019 reached 14.06% (2018: 14.39%, 2017: 17.2%) and return on assets (after tax) reached
1.71% (2018:1.79%; 2017: 2.2%).

Profit after tax Income from banking operation


500 1,280
1,120
400 960
800
300 640
480
320
200
160
-
100 2015 2016 2017 2018 2019
-160

- Net trading income


2015 2016 2017 2018 2019
Net fee and commission income
Profit after tax Net interest income

During the reporting period Fibank Albania continued its business development in accordance with
the economic environment and the need of financing. Total income from banking operations
increased by 21.92% and reached ALL 1,379,012 thousand (2018: ALL 1,131,058 thousand; 2017:
ALL 1,082,071 thousand).
Interest income meet an increase by 3.12% to ALL 1,193,607 thousand (2018: ALL 1,157,472
thousand; 2017: ALL 1,026,758 thousand). A main contributor was interest income from retail
customers which increased by 21.97% to ALL 266,211 thousand (2018: ALL 218,253 thousand;
2017: ALL 188,122 thousand), meanwhile loans to small and medium enterprises increased by
0.85% to ALL 550,424 thousand (2018: ALL 545,727 thousand; 2017: ALL 434,543 thousand), and
together represent 68.42% of total interest income.
A slight decrease by 8.21% was also reported for securities transactions, whose interest income
amounted to ALL 354,024 thousand (2018: ALL 385,682 thousand; 2017: ALL 395,852 thousand)
and formed 29.66% of total interest income.

Interest income structure


1.9%
Acc with and placements to
banks and fin instit
29.7% 22.3% Retail loans

Loans to SME
46.1%
Debt instruments available
for sale
THE Annual Report FIBANK ALBANIA /2019 25
Net fee and commission income faced an increase by 12.95% or ALL 28,129 thousand and
amounted to ALL 245,316 thousand (2018: ALL 217,187 thousand; 2017: AL 209,407 thousand)
due to increased business volumes and customers of the Bank. Meanwhile net fee and commission
income had a relative share of 17.79% of total income from banking operations, with approximately
the same share as in 2018 19.20% and 2017 19.35%, as a result of the Bank’s consistent policy on
the diversification of income from banking operations.
The predominant share of fee and commission income was formed from customer accounts fees
with 35.75% followed by 29.66% of income other fees and commission income and then with
18.43% and 14.92% of income from card business income and payment transactions respectively.

Fee and commission income structure


1.2%
Letters of credit and
guarantees - income
14.9% Payments transactions
29.7%
Customer accounts
35.8%
18.4% Cards business - income

Other - fee and commission


income

General administrative expenses decreased by 2.7% and reached ALL 468,041 thousand for the
reporting period (2018: ALL 481,039 thousand; 2017: ALL 399,976 thousand). Personnel expenses
formed the biggest portion of 66.33% while the smallest share of 5.60% is presented by the group
Advertising & PR expenses.

Structure of administrative expenses

Personnel expenses

21.7%
Advertising & PR expenses

6.3%
5.6% Maintenance and repair
66.3%
Administration, consultancy
and other costs

Net impairment losses of loan exposures accrued by the Bank amounted to ALL 130,787 thousand
for 2019, compared to ALL 71,880 thousand in the previous year (2017: ALL 84,430 thousand).

Balance Sheet
As at the end of December 2019, the total assets of Fibank Albania reached ALL 31,722,865
thousand (2018: ALL 24,632,952 thousand; 2017: ALL 20,994,963 thousand) increased by 28.78%
(amounted ALL 7,089,913 thousand) resulted mainly from increase in loans and advances to
customers by 25.24%, increase in investment in securities at FVOCI by 22.42%, cash and balances
with central bank faced an increase by 48.93%.
During 2019 Fibank Albania showed a consolidated financial position for the eighth year in a row
and reach in 2.12% of market position in the whole banking system.
THE Annual Report FIBANK ALBANIA /2019 38

Total Assets
35,000
30,000
25,000
20,000
15,000
10,000
5,000
-
2015 2016 2017 2018 2019

Total Assets

Assets structure
10.3% 2.2% 6.5%
Cash
0.7% 4.9%
Balances with Bank Of Albania

Other assets

Loans and advances to customers


29.1%
Financial instruments
46.2%
Fixed assets

Loans and advances to banks and


financial institutions

The asset structure remained relatively unchanged reflecting market conditions and the Bank’s
strategy for maintaining an adequate balance between risk, capital and return. Portfolio loans and
advances to customers preserved first majority share and formed 46.2% (2018: 47.6%; 2017:
45.3%), leads by financial instruments (investment in securities at FVOCI) 29.1% (2018: 30.6%;
2017: 33.5%) of total assets, and loans and advances to banks and financial institutions at 10.3%
(2018: 9.9%; 2017: 8.9%).
Cash and balances with central banks increased by 25.6% (ALL 561,099 thousand) to ALL
2,753,758 thousand (2018: ALL 2,192,658 thousand; 2017:1,941,733 thousand) while current
accounts and balances with the Central Bank are increased with 19.21% amounted ALL 2,052,413
thousand (2018: ALL 1,721,734 thousand; 2017: 1,548,405 thousand), resulting from the increased
deposit base and the maintenance of minimum required reserves. Cash on hand increased by
48.9% (ALL 230,421 thousand) to ALL 701,345 thousand (2018: ALL 470,924 thousand; 2017:
393,328 thousand), as a percentage of total assets were at level of share 2.21% (2018: 1.91%;
2017: 1.87%) as the Bank manage cash in respect of its daily operations and in accordance with
the market environment and external conditions.
Loans and advances to banks and financial institutions increased to ALL 3,279,997 thousand,
compared to ALL 2,448,132 thousand at the end of 2018, (2017: ALL 1,859,013 thousand) as a
result of an increase on customer deposits.
Portfolio of financial instruments is comprised of investments in securities at FVOCI. At the end of
the year such portfolio faced an increase with approximately 22.42% to ALL 9,230,939 thousand
(2018: ALL 7,540,289 thousand; 2017: ALL 7,026,487 thousand). The entire portfolio is comprised
from papers of Albanian Government, Belgium Government, EFSF and other corporate bonds.
THE Annual Report FIBANK ALBANIA /2019 39

Loans
In 2019 Fibank Albania gross loan portfolio increase by 24.4% (ALL 3,007,000 thousand) and
reached ALL 15,322,577 thousand at the end of the period (2018: ALL 12,315,114 thousand; 2017:
ALL 10,175,758 thousand). The year has been very good in lending; the growth rate is following the
same trend as per the last two years. It was affected by the increase in loans in both segments;
retail and small and medium enterprises, respectively with 36.1% and 17.8%. This was also in
compliance with the Bank’s strategy for increasing lending as consequently of increasing funds
received.
During 2019, the Bank opened one new branch and increased its presence in Tirana. This action
followed the opening of three new branches in 2018. By increasing the network, Fibank intends to
be nearer to the client.
Loan portfolio by business line:

In ALL thousand / % of total 2019 % 2018 % 2017 %


Retail customers 6,080,542 39.6 4,467,013 36.3 2,893,989 28.4
Small and medium enterprises 9,242,035 60.4 7,848,101 63.7 7,281,769 71.6
Gross loan portfolio 15,322,577 100 12,315,114 100 10,175,758 100
Impairment (652,920) (602,040) (657,978)
Loan portfolio 14,669,657 11,713,074 9,518,779
At the end of 2019 loans to small and medium enterprises lowered its share in the Bank’s loan
portfolio, at 60.3% (2018; 63.7%; 2017; 71.6%) meanwhile loans to retail customers significantly
increased its share at 39.7% (2018: 36.3%: 2017: 28.4%). Fibank continued to support sound
projects in accordance with the need for financing and market conditions in the country. Meanwhile
retail focus was to increase the number of the salary receivers in Fibank, through designing new
and innovative products tailored for them.
Loan portfolio by currency:
In ALL thousand / % of total 2019 % 2018 % 2017 %
Loans in ALL 4,991,801 32.6 4,371,140 35.5 3,752,990 36.9
Loans in EUR 10,079,014 65.8 7,575,740 61.5 6,111,546 60.1
Loans in other currency 251,762 1.6 368,203 3 311,222 3.0
Gross loan portfolio 15,322.577 100 12,315,114 100 10,175,758 100
Impairment (652,920) (602,040) (657,978)
Loan portfolio 14,669,657 11,713,074 9,517,780
Loans and advances in EUR continue to form a predominant share equal to 65.8% (2018:61.5 %;
2017: 60.1%) in the currency structure of the loan portfolio. They reached the amount of ALL
10,079,014 thousand at the end of the period, 32.6% of total disbursements (2018: 7,575,740;
2017: 6,111,546). The effort of the Bank is to lend in local currency, minimizing though foreign
exchange risk for the borrowers. Loans in ALL increased in absolute value, to ALL 4,991,801
thousand (2018: 4,371,140 ALL; 2017: ALL 3,752,990 thousand) and loans in other currencies
decreased in absolute value, to ALL 251,762 (2018: ALL 368,203 thousand; 2017: ALL 311,222
thousand) respectively.
THE Annual Report FIBANK ALBANIA /2019 40

Loans portofolio
16,000

14,000

12,000

10,000

8,000

6,000

4,000

2,000

-
2015 2016 2017 2018 2019

Loan portfolio Impairment

The quality of the loan portfolio is improved compared to prior year and is approximately the
same as NPL ratio of banking system. At year end of 2019 the NPL ratio is 8.7% (NPL’s of
banking system in 2019: 8.4%) as problematic loans (those classified as non-performing)
amounted to ALL 1,337,814 thousand at the end of the year. Allowances for impairment
increased and reached ALL 652,920 thousand (2018: ALL602,040 thousand; 2017: ALL 657,978
thousand). In accordance with the Bank prudency in lending and based also on the effective
collection process, total allowances for loans to customers increased by 8.45%, much lower than
the increase in the portfolio. Allowances for impairment for loans, classified as non-performing
amounted to ALL 392,136 thousand. The Bank applies rules for the classification and
impairment of risk exposures which are in compliance with the criteria provided by International
Financial Reporting Standards. The loan provisioning ratio was 4.3% (2018: 4.9%,2017: 6.5%;
2016: 7.7%).

Loan portofolio by collateral


5.4% 5.9%
3.1%
3.8% Money deposit
4.6% Mortgage
0.0% Securities
4.2% Guarantee
Pledge of machines
Pledge of goods

72.9% Pledge of receivables


Unsecured

The policy of the Bank requires proper collateral coverage before granting a loan. In this respect, it
accepts all types of collateral permitted by law and applies discount rates depending on the
expected realizable net value of the collateral. At the end of 2019 the collateral with the largest
share in the Bank’s portfolio were mortgages at 72.9%, followed by money deposit at 5.9%,
unsecured 5.4% and pledge of machinery at 4.6%.
THE Annual Report FIBANK ALBANIA /2019 41

Related Party Transactions


In the normal course of business the Bank carries out transactions with related parties. These
transactions were effected in market conditions. The internal rules and regulations of the Bank with
respect to such transactions and agreements are in compliance with the effective legislation.
For further information regarding related party transactions, see Note 32 “Related parties” of
the Financial Statements as at 31 December 2019 together with the Report of the Independent
Auditor.

Commitments and Contingent Liabilities


Commitments and contingent liabilities of the Bank include bank guarantees and commitments
given on behalf of customers. These are issued in compliance with the general loan policy of the
Bank on risk assessment and collateral sufficiency. Contingent liabilities are preferred instruments
for credit institutions because they carry lower credit risk and at the same time are good sources of
fee and commission income. They are also preferred by clients because they not only facilitate
payments but also reduce the cost of financing as compared to direct financing and immediate
payment.

Contingent liabilities Structure of contingent


liabilities
750
2.7%
In ALL millions

600 7.6%

450

300 Letters of credit


150 Bank guarantees
89.8%
- Commitments given to
2015 2016 2017 2018 2019 customers

At the end of the reporting period, the total amount of off-balance sheet commitments increased to
ALL 729,394 thousand (2018: ALL 489,977 thousand 2017: ALL 509,104 thousand). Unused credit
lines have a predominant share of 89.8% in the total amount of contingent liabilities, followed by
bank guarantees at 7.6%. Unused credit lines increased by ALL 261,444 thousand reaching the
value of ALL 654,637 thousand (2018: ALL 393,193 thousand; 2017: ALL 481,829 thousand).

Attracted Funds
In 2019 attracted funds from customers increased by 27.78% (ALL 5,781,089 thousand) and
reached ALL 26,588,459 thousand (2018: 20,807,370 thousand; 2017: ALL 17,229,570
thousand) remaining the Bank’s major source of funding.
THE Annual Report FIBANK ALBANIA /2019 42

Customer Deposits
28,000

24,000

20,000

16,000
Individuals
12,000

8,000 Entities

4,000

-
2015 2016 2017 2018 2019

Attracted funds from retail customers increased by 17.75% (ALL 3,277,019 thousand) up to ALL
21,735,753 thousand (2018: ALL 18,458,733 thousand; 2017: ALL 15,625,070 thousand)
during the year, preserving their upward trend over the last year and maintaining their
predominant share in total attracted funds from customers at 81.75%.
In the currency structure of attracted funds from retail customers those in ALL were greatest at
41.39% of total attracted funds from customers (2018: 45.24%; 2017: 50.43%), those in EUR
were at 37.62% (2018: 40.24%; 2017: 36.9%) and those in other currencies at 2.74%.

Deposits from individuals


25,000

20,000

15,000

10,000

5,000

-
2015 2016 2017 2018 2019

In ALL In EUR In other currency

Due to other customers

In ALL thousand / % of total


2019 % 2018 % 2017 %
Retail customers 21,736,753 82% 18,458,733 89% 15,625,655 91%
In ALL 11,003,686 41% 9,413,350 45% 8,689,579 50%
In EUR 10,003,099 38% 8,372,545 40% 6,355,642 37%
In other currency 728,967 3% 672,838 3% 580,434 3%
Corporate, state-owned and public
institutions 4,852,706 18% 2,348,637 11% 1,603,915 9%
In ALL 1,753,977 7% 565,244 3% 475,973 3%
In EUR 2,885,427 11% 1,689,430 8% 1,056,893 6%
In other currency 213,302 1% 93,963 0% 71,049 0%
Total attracted funds from customers 26,588,459 100% 20,807,370 100% 17,229,570 100%
THE Annual Report FIBANK ALBANIA /2019 43

Fibank Albania sets aside the required annual premiums in accordance with the law “On insured
deposits”, which serves to increase the safety of the Bank’s depositors. According to regulatory
requirements the amount guaranteed by the Insurance Deposit Agency on customer’s bank
accounts held with the Bank is ALL 2,500,000 per retail customer.
Attracted funds from corporate, stated-owned and public institutions increased by 106.62% (ALL
2,504,069 thousand) up to ALL 4,852,706 thousand (2018: ALL 2,348,637; 2017: ALL 1,603,915
thousand) during the year, increasing their relative share to 18.25% of total attracted funds from
customers (2018: 11.29%; 2017: 9.3%).
In the currency structure of attracted funds from corporate, stated-owned and public institutions
those in ALL formed 6.60% of all attracted funds from customers (2018: 2.72%; 2017: 2.76%),
those in EUR were at 10.85% (2018: 8.12%; 2017: 6.13%).

Internal audit
The internal Audit department in First Investment Bank Albania carries out independent, objective
assurance and consulting activities, having the adequate resources and access to the management
and supervisory bodies. It contributes to add value and improve Bank’s operations, while
accomplishing its objectives.
It evaluates the effectiveness of risk management, control, and governance processes and gives
reasonable assurance that laws and regulations, strategies, and policies are strictly adhered to, and
appropriate and timely corrective actions are taken.
Internal Audit carries out periodic planned and extraordinary inspections to ensure efficient use of
resources, adequate control of various risks, protection of assets, reliability and integrity of f inancial
and management information, and compliance with current internal and external regulatory
framework.
The Steering Council approved the Annual Report on the Internal Audit activities of 2019 in March
2020, which informs Steering Council members on the main results of the activities of Internal Audit,
the measures taken, and their fulfillment.

Risk Management
Risk Management has the responsibility to identify measure and monitor credit, market and
operational risk in all its banking operations. Risk Management monitors bank’s exposures that
carry credit risk as loans, overdrafts, guarantees, letter of credit, deposit accounts with other banks,
investment securities and all other products where the debtor has or may have a contingent or
direct obligation to the bank.
Fibank aims to constantly develop, update and improve to the highest risk management systems in
order to meet the challenges of the market environment and in the legal framework.

Risk appetite
Risk appetite reflects the types and size of risks the Bank is able and willing to take in order to
achieve its strategic business goals. The risks identified in the risk map are included in the risk
appetite. With the aim of maintaining a moderate risk profile, the main goals on the basis of which
the risk strategy is structured, are defined, as follows:
achieving a sustainable level of capital to ensure good risk taking capacity, as well as
capacity to cover risks in the long term;
THE Annual Report FIBANK ALBANIA /2019 44
maintaining good asset quality while providing for an efficient decision-making process;
achieving a balanced risk/return ratio for all business activities of the Bank.
The risk demand is subject to Managing Board review one yearly basis or in accordance with the
business environment dynamics, capital support, liquidity, regulatory limits. It is part of the annual
process for defining the strategy and planning within the Bank.
Risk culture
In compliance with the best risk management standards, the Bank seeks to develop a risk culture
that will further enhance visibility and prevention in terms of individual risk types, their identification,
evaluation and monitoring, including by applying appropriate forms of training among the
employees and senior management involved in risk management.

Risk Management Framework


The Board of Directors has an overall responsibility for the establishment and oversight of the
bank’s risk management. For the purpose of managing various types of risk in compliance with the
requirements of the Bank of Albania, the following bodies operate in Head Office:
Credit Committee of Fibank Albania has the authority to approve loan applications as per limits
approved, as of February 2017. Credit Committee Members consists of: Chief Executive Officer,
Executive Director, Head of Risk Management, Chief Financial Officer and Head of Legal
Department.
Operational Risk Committee (ORC) is responsible for implementing policies, processes and
procedures for administrating operational risk for all services/products, activities, processes and
systems relevant to the bank. Operational Risk Event Committee is composed of: Head of Risk
Management, Head of Operational and Loan Admin, AML & Compliance Unit manager, Operational
& Loan Admin Specialist, Head of IT Department and Senior Credit & Operational Risk Analyst.
The Bank risk’s management policies are established to identify and analyze the risks faced by the
Bank, to set appropriate risk limits and controls and to monitor these limits. Risk Management
policies and systems are reviewed regularly to reflect changes in market conditions, products and
services offered.

Credit Risk
Credit Risk is the risk of financial loss to the bank if a customer or counterparty to a financial
instrument fails to meet its contractual obligations and arises principally from the Bank’s loans and
advances to customers, other banks and investment securities. Credit Risk Management performs
independent credit and risk analysis of loan proposals which are being proposed.
Credit Risk Management monitors the performance of borrowers; this includes non-performing
loans to ensure appropriate action is being taken due to the improvement of the loan quality of the
portfolio. Credit amounts requested above authority approval of Branch Managers and up to
equivalent ALL 15 MIO and ALL 10 MIO are approved by Risk Management together with SME and
Retail respectively. Credit amounts requested above ALL 15 MIO for SME and ALL 10 MIO for
Retail and up to EUR 500,000 are approved by Credit Committee and above EUR 500,000 are
approved by the Board of Directors.
THE Annual Report FIBANK ALBANIA /2019 45

Market Risk
Market risk is the risk of losses due to changes in the prices of financial instruments resulting from
general risk factors not related to the specific characteristics of individual instruments such as
changes in interest rates, exchange rates. The main objective of administrating market risk is to
manage and control market risk and to keep it within required limits.
Stress-testing is a useful method to analyze the resilience of a financial institution. Stress testing is
a general term encompassing various techniques for assessing resilience to extreme events. They
involve testing beyond normal operational capacity, often to a breaking point, in order to observe
the results.
Stress-testing can be thought as a process that includes identification of specific vulnerabilities or
areas of concern; construction of a scenario; mapping the outputs of the scenario into a form that is
usable for an analysis of financial institutions. Stress test allows a more detailed assessment of the
capital adequacy commensurate with Bank’s risk profile and the current operating environment. RM
performs the stress testing techniques on quarterly basis and all respective analysis are reported to
ALCO and Board of Directors.
Interest rate risk is the exposure of a bank’s financial condition to adverse movements in interest
rates. Accepting this risk is an essential part of banking and can be an important source of
profitability and shareholder value. However, excessive interest rate risk can pose a significant
threat to a bank’s earnings and capital base.
Interest rate risk in the banking book is monitored and analyzed in order to assess the impact of
interest rate scenarios on the economic value of the Bank and on the net interest income with a
one-year horizon. The evaluation of the impact on net interest income is based on a maturity/re-
pricing table of assets and liabilities and the estimated change in interest rates by classes of
instruments following a change in market interest rates. Taking in consideration the sensitivity of
interest rate risk in the financial position of the Bank, RM monitors internal as well as Bank of
Albania`s limit on monthly bases, and respective analysis are reported to ALCO on monthly basis
and Board of Directors on quarterly basis.
Evaluating the complexity of operations of Fibank Albania, Risk Management has oriented the risk
management structures toward the main resource or risk from interest rates, which is the re-pricing
risk.
The risk from exchange rate means the loss caused to the bank due to the unfavorable
development of exchange rates in ALL, incomes and expenses in foreign currency (risk from
transactions) or the value in ALL of net assets of the bank (risk from translation).
Fibank Albania has limits for the foreign exchange position in a currency as well as total positions
for all currencies.
Based on the regulation from Bank of Albania “On the open foreign exchange positions risk
management”, Risk Management monitors on daily basis the limits for each position in individual
currency the limit of all positions, while in weekly bases reports to ALCO for Value-at-Risk for the
basket of currencies.
THE Annual Report FIBANK ALBANIA /2019 46

Liquidity Risk
Liquidity Risk is the risk that the bank will encounter difficulties in meeting its obligations associated
with financial liabilities that are settled by delivering cash or other financial assets. Liquidity risk
tolerance level is defined as the level of liquidity risk that the bank is willing to undertake. The
tolerance level appropriates the business strategy of the bank and reflects the bank’s financial
condition and funding capacity. The tolerance ensures that the bank manages its liquidity strongly in
normal times and that it is able to withstand a prolonged period of stress. Liquidity Risk
Management policy includes how the Bank identifies, measures, monitors and control that risk.
Fibank Albania estimates the liquid position of the bank by means of the following indirect
indicators: assets with high liquidity in relation to assets in total and assets with high liquidity in
relation to short-term liabilities.
In the same time, the Bank has also developed methodology for calculation of Liquidity Coverage
Ratio at Fibank Albania, which is in full compliance with regulation No.27 date 28.03.2019 on
“Report on the Coverage with Liquidity” of Bank of Albania.
The objective of the LCR is to promote the short-term resilience of the liquidity risk profile of the
Bank. It does this by ensuring that the Bank has an adequate stock of unencumbered high-quality
liquid assets (HQLA) that can be converted easily and immediately in financial markets into cash to
meet their liquidity needs for a 30-calendar day liquidity stress scenario. In the internal rules for
Liquidity Coverage Ratio are clearly specified:
Criteria and rules for the calculation of LCR; and
The minimum level of LCR
The liquidity risk management practices integrates and considers a variety of factors, regarding the
time horizons over which to identify, measure, monitor and control liquidity risk. These include
vulnerabilities to changes in liquidity needs and funding capacity on an intraday basis; day-to-day
liquidity needs and funding capacity over short and medium-term horizons; longer-term,
fundamental liquidity needs over one year; and vulnerabilities to events, activities and strategies
that can put a significant strain on internal cash generation capacity.

Internal Capital Adequacy Analysis


Based on the decision of Supervisory Council of Bank of Albania No 26 dated 03.05.2017 on the
Guideline “On Internal Capital Adequacy Assessment Process”, Internal Capital Adequacy
Assessment Process (ICAAP) is mandatory for all banks licensed to conduct banking and financial
activity in the Republic of Albania. ICAAP report is produced annually and represents First
Investment Bank Albania Sh.a`s own assessment of its internal capital requirements.
The ICAAP report serves two key purposes:
It informs Steering Council and the Management how the Bank assesses its risks, how it
intends to mitigate those risks and how much current and future capital is deemed
necessary to support operations in light of those risks.
The ICAAP report is also the means by which the Bank evidences its internal capital
adequacy assessment processes to the regulations issued by Bank of Albania.
The primary purpose of the Internal Capital Adequacy Assessment Process (ICAAP) is to ensure
that the Bank has sufficient capital at all times to cover the risks associated with its activities, as
THE Annual Report FIBANK ALBANIA /2019 47
well as to inform the Steering Council for ongoing assessment of risks, how the Bank intends to
mitigate those risks and how much current and future capital is necessary having considered other
mitigating factors.
The Bank applies Bank of Albania`s regulation and guidelines on risk management and capital
adequacy, which, together with internal policies, regulations and decisions for managing credit,
market, operational and other risks builds its overall internal system of the Bank to manage the risks
associated with the Bank's operations and the adequacy of its capital.
The Bank's approach on calculating its own internal capital requirements is to take the minimum
capital required for credit, market and operational risk under Pillar 1 as the starting point, assess
whether this is sufficient to cover risks, and then identify other risks and assess prudent levels of
capital to meet them.
ICAAP is adopted at the highest levels of Fibank Albania structure and risk management
processes. ICAAP assumptions are being challenged and examined to ensure that Fibank Albania
continues to retain its focus on the risks it faces.
Recovery Plan
Recovery Plan (Plan) of First Investment Bank Albania SH.A has been prepared pursuant to Bank
of Albania regulation “On Banks Recovery Plan” Nr.72 dated 06.12.2017 for all banks licensed to
conduct banking and financial activity in the Republic of Albania.
The recovery plan defines the measures to be taken to counteract negative factors and shocks of
various kinds, as well as to demonstrate the ability of Fibank to restore viability. The plan
contributes to building a stable recovery strategy of the Bank in a crisis situation to cover the widest
possible range of potential threats. This recovery plan does not provide access to or receipt of
extraordinary public financial support. The plan defines people and departments in the Bank who
are responsible for developing, updating and implementing as well as the process for its approval.
Indicates also people in charge as coordinators of Recovery Plan. An essential element of the Plan
is the procedure for timely implementation of recovery measures, which sets out the relevant
departments to monitor specific indicators of recovery, escalation timetable for decision-making,
monitoring their application and notifications.
Sets the following quantitative and qualitative early warning signals and indicators of recovery, the
occurrence of which triggers the implementation of recovery measures:
Capital Indicators
Liquidity Indicators
Profitability Indicators
Assets quality Indicators
Market Based Indicators
Key Business Lines of the Bank includes SME lending, Retail Lending, Investments in Securities
and Deposit taking. Critical functions necessary for the smooth functioning serving depositors and
borrowers - the main source, appropriate resource and incomes for the Bank.
Recovery measures include the measures related to availability of credit line from First Investment
Bank AD (mother bank), sale of security portfolio, the sale of loan portfolio, optimizing the
conditions of deposit products, limiting lending, sale of repossessed assets and sale of loan
portfolio. As a permanent measure is provided internal sources of capital increase. For each
measure of recovery is an assessment of its impact including on critical bank functions assess, the
THE Annual Report FIBANK ALBANIA /2019 48
feasibility and risks associated with its implementation and identify the necessary time for
implementation and evaluation of its effectiveness.
An important element is a plan for public relations and information disclosure, which describes
various methods for dealing with negative effects on the market (false rumors, misleading
publications) when there are conditions for the implementation of recovery measures. The Bank has
specialists in communications who know the high professional media market, and are aware of
communication channels both in the bank and external to it.

Operational Risk
Operational Risk is defined as the risk of loss resulting from inadequate or failed internal processes,
people and systems or from external events. This definition includes Legal Risk, but excludes
Strategic and Reputation Risk.
The bank handles Operational Risk as a distinct risk category. Sound and comprehensive
operational risk management is a vital part in achieving the Vision, Mission and Values of the Bank.
This will underline the commitment of the Bank to meet high ethical and business standards in the
way it conducts its business.
The bank has created and developed an adequate internal system (policies, procedures, rules and
techniques) for administrating operational risk management. The purpose of this system is to
identify, evaluate, control and monitor regularly the operational risk.
Risk Management defines and categorizes operational events across event types and business
lines inherent in banking; the department also defines the responsibilities of employees from
different departments tasked with data collection.
ALCO of the Bank assigns Operational Risk Committee (ORC) with the role of managing the
operational risk.
Operational Risk Committee is responsible for:
Implementing policies, processes and procedures for administrating operational risk for all
services / products, activities, processes and systems relevant to the bank
Implementing of internal acts for administrating operational risk management to all business
lines
Implementing of the responsibilities and development of reporting lines to encourage and
maintain accountability, provide financial and human resources needed to effectively
manage operational risk
Clear communication of the policy subject to operational risk to employees of the bank at all
levels, especially in units that are exposed to operational risk
Ensuring that personnel responsible for monitoring the implementation of the Policy of
administrating operational risk, to be independent from the business lines they control.
Reviewing and analyzing the Key Risk Indicators which are used by business lines for their
self- assessment.
Introduce benchmarks for each key risk indicator from reporting department and monitor all
deviations from these benchmarks with related arguments and proposed measures.
Establishing on yearly basis Budget for operational losses based on historical data and
divides this budget into different business lines in order to better monitor operational losses.
THE Annual Report FIBANK ALBANIA /2019 49
Analyzing and taking decisions for reimbursements of credit cardholders claim related to
fraud transactions, reimbursements of annual fees, interest etc. based on analysis and
investigation performed by Card Department for amount over EUR 20.
Analyzing and taking decisions based on results of Self-Assessment of operational risk and
controls, followed by allocation of tasks and responsibilities to related departments.
Further, to elicit bank’s performance in the long term, the need for measuring the risks in advance
becomes an important procedure for management to assess the potential impact of an activity
performed and the possible risks it carries. Such evaluation metrics are essential to pro-actively
manage the prospective risky ventures and facilitate timely detection and take appropriate steps to
prevent malfunctions. The timing plays a significant role as the sooner a risk is identified and
tackled, better would be the chances to avert it and would ensure timely action and assist in long
term success of the organization. While using KRIs the following criteria are taken into
consideration:
Select the right indicators to anticipate potential problems.
Identify and specify an indicator and integrate it within your risk management framework.
Understand the methods and strategies to use KRIs efficiently.
Learn how to avoid subjectivity in operational risk reporting.
Master how to avoid useless information to ensure the right decisions.
Collect the right information and work with effective indicators.
Risk and control self-assessment is another tool to assess the exposure of Fibank Albania to
operational risk and operational controls to reduce this type of risk.
Self-Assessment can be conducted in the form of questionnaires or by analyzing the work
processes.
The results of self-assessment are used to reduce operational losses, to identify gaps in controls
and respectively improve control mechanisms and are reported to Operational Risk Committee
(ORC) and ALCO. Reporting of the process results and the follow ups is also submitted to
Operational Risk Management Fibank Bulgaria.
THE Annual Report FIBANK ALBANIA /2019 50

Distribution Channels
Head Office Tirana
Blvd. Dëshmorët e Kombit,
Twin Towers,
Nr.2, kati 14/15 Tiranë,
Shqipëri
Tel.: (+355 4) 2276 702/3
Fax: (4) 2280 210

Dega Virtuale Numër pa Pagesë

http://e-banking.fibank.al 0800 01 11

AGJENCITE
Twin Towers Korçë

Blvd. Dëshmorët e Kombit Rr. “Midhi Kostani”

Twin Towers, Nr.1, Kati 1 Kompleksi “City Center”,


Tel.: (+355 4) 2276 771/2 Kati i parë
Fax: (4) 2280 210 Tel.: (+355 82) 259 000/1/2/3
Fax: (82) 246 000

Tirana 1
Rr. Kavajës, pranë “Zoja e Fier
Këshillit të mirë” Lagjia “29 Nëntori”, sheshi “Fitorja”,
Tel.: (+355 4) 22 76 755/80 ish-klubi “Partizani”
Fax: (4) 2256 424 Tel.:(+355 34) 249 850/1/2/3
Fax: (34) 231 730
Tirana 2
Rr. Teodor Keko, Unaza e Re, Shkodër
Tel.: (+355 4) 2280210 Lgj. Qemal Stafa, Rr. Vasil Shanto,
Sheshi i Parrucës,
Tirana 3 Tel.: (+355
Bulevardi "Zogu I". Nr.23, 22) 252
(Ngjitur me Fakultetin e 830/1/2/3
Shkencave)
Tel.: (+355 4) 2211 555
Lezhë
Lagjia Skëndërbeg, Rr. H.Ali Ulqinaku,
Durrës
Tel: (+355 21) 520 114
Lagjia nr.12, Rr. “Dëshmorët”
Tel.: (+355 52) 293 700/1/2/3
Berat
Fax:(52) 233 444
Lagjia “10 Korriku” Rruga Antipatrea,
pranë Gjykatës Berat
Vlorë
Blvd. Ismail Qemali, L. Lef Tel.: (+355 32) 259 200/2/3
Sallata
Tel.: (+355 33) 236 100/1/2/3 Fax. (+355 32)236 031
Fax:(33) 224 680
Sarandë

Elbasan Rr.Onhezmi 18

Lagjia “Qemal Stafa”


Rr. “11 Nëntori” Lushnje
Tel.: (+355 54) 210 000/1/2/3 Lagjia Çlirimi ish Hotel Myzeqeja,
Fax:(54) 246 951 (ngjitur me Credins Bank)
Tel.: (+355 35) 200 070
THE Annual Report FIBANK ALBANIA /2019 43

Information Technologies
Successful Switchover of Core Banking Database Servers
In the beginning of November 2019, we successfully did switchover of the Primary Oracle Database
Server to the Data Guard Server. We worked for one week with the Data Guard Server as a
Primary DB Server and used the former Primary DB Server as Data Guard. Then we successfully
switched over back to our Primary DB Server. This proved our readiness to switch the DB servers
in the case of disaster and emergency situations.

New Implementations in the Core Banking System


In the Core Banking System (Datamax Software) together with Datamax Company we successfully
implemented the Cash Denomination Module. This will allow the bank agencies to have better
control of cash flows in their cash desks and also ATMs belonging to the respective agencies.
In 2019 we started the project for Mobile Banking together with Datamax Company. This will allow
our clients to do bank transactions on their mobile devices and will allow the bank to extend their
services through other digital channels. We shall continue to improve our Mobile Banking and E-
banking by making them easier for our clients and in the same time more secure by implementing
the last achievements of the digital technology.
Also, in 2019 we started another big project – Cash-in Project. The bank purchases new ATMs
which allow not only cash withdrawals but also cash deposits to client’s accounts. This new service
will allow our clients to not waste time and deposit money in bank’s agencies, but to use bank’s
ATMs for this purpose. We hope this will dramatically improve the service of our customers.
Together with Datamax Company, in 2019, we developed and started using a new Module for
MoneyGram transfers. The functionality of this module is dedicated especially to MoneyGram
transfers and replaced the old-fashioned way for working with MoneyGram where we used Front
Office object for such transfers. The new MoneyGram module automatized the fee collection for
these transfers and also the work with non-clients for these types of transfers.
In 2019 we started working on a project to automatize utility payments through our bank. We started
first with OSHEE payments by using the digital interfaces they developed. We plan to extend this
functionality with other Utility companies – UKT, Telekom – Albania, Vodafone, etc.

Changes related with security


Building up new IT governance Procedures and Policies
In June 2019has been started project for fulfilling all gap related to IT governance Procedures and
Policies. These was related to internal and external auditor. Essentially, IT governance provides a
structure for aligning IT strategy with Fibank strategy. By following a formal framework, Fibank can
produce measurable results toward achieving their strategies and goals.
New Implementations in the SIEM System
In the SIEM system are being implemented new rules regarding monitoring internal system.
Security information and event management (SIEM) is an approach to security management that
combines SIM (security information management) and SEM (security event management) functions
into one security management system. Here are some of the most important features to review
when evaluating SIEM. Integration with other controls. Extensive compliance reporting. Forensics
capabilities.
THE Annual Report FIBANK ALBANIA /2019 44

Web Proxy Internet security


A proxy server acts as a gateway between Fibank and the internet. It’s an intermediary server
separating end users from the websites they browse. Provide varying levels of functionality,
security, and privacy depending on Fibank use case, needs, or policy. Now we are using a proxy
server, internet traffic flows through the proxy server on its way to the address all internal
requested. The request then comes back through that same proxy server (there are exceptions to
this rule), in a secure manure.

Changes related to IT infrastructure


Network Changes
We segmented network into different VLANs and upgraded IOS on all network devices in Branches
(routers and switches) and HQ. We introduced a new internal firewall device from checkpoint and
further separation.
We installed and configured a new Network Core Switch which congregates all network traffic. We
installed and configured TACACS+ system for network Authentication and Authorization.
The purpose is to improve network performance and security.
We replaced all network devices in Branches (routers and switches). The purpose is to improve
network performance and security.

Implementation of Cloudflare Service


We purchased Cloudflare subscription service to protect internet facing sites such as www.fibank.al,
e-banking.fibank.al,mail.fibank.al. Also, Cloudflare is configured as External DNS for these sites
with no additional costs.
Upgrade of Domain Controllers
We upgraded Domain Controllers from Windows Server 2012 to 2019 for security and performance
issues.
DigiCert Multidomain SSL certificate
We purchased Multidomain SSL certificate from DigiCert Certificate Authority to increase security
for www.fibank.al,mail.fibank.al,autodiscover.fibank.al. This was a mandatory requirement.
Hyper V Failover Cluster Servers Platform Upgrade
We upgraded Hyper V Failover Cluster from 2012 version to 2016 version. This to improve security
and resiliency of the platform.
Upgrade of Mail Servers
We upgraded the Exchange mail servers to latest CU (Cumulative Update) for 2013 to improve
security and functional features.
THE Annual Report FIBANK ALBANIA /2019 45

Corporate Governance
First Investment Bank, Albania Sha is a joint-stock company registered with Tirana district Court
dated 19 April 2006. Since 2007 the Bank has been registered in the Commercial Register at the
National registration center. The Bank owns a banking license for domestic and international
operations. First Investment Bank, Albania Sha has a one-tier governance system. The corporate
governance of First Investment Bank, Albania Sha is a system with clearly defined functions, rights
and responsibilities at all levels - the Shareholder assembly, Steering council and its committees,
Audit committee, Directorate and structures at the Head Office and the branches. First Investment
Bank, Albania Sha offers a wide range of services in the sphere of corporate banking, lending to
companies, servicing individuals, card payments, payment and trade operations.
The Shareholder assembly - the highest governance body, allowing the shareholders to take
decisions on principle matters relating to the existence and the activity of the Bank.
Steering council (SC) - defines the strategy for development of the Bank manages the Bank by
resolving all issues within its scope of activity, except those within the exclusive competence of the
Shareholder assembly. It carries out the strategy for development of the Bank. The Steering council
is supported in its activity by committees (Credit Committee, Alco, HR Committee, Workout
Committee, Operational Risk Committee, Compliance Committee, IT Risk assessment Committee,
Anti-Fraud Committee) and which carry out their activities on the basis of a pre-determined written
structure, scope of activities and functions. The Steering council of Fibank Albania holds sessions
every month.
The Directorate carries out the management of the Bank by resolving all issues in its line of
business, except those within the exclusive competence of the Steering Council.
First Investment Bank, Albania Sha is a joint-stock company registered with Tirana district Court
dated 19 April 2006. Since 2007 the Bank has been registered in the Commercial Register at the
National registration center. The Bank owns a banking license for domestic and international
operations. First Investment Bank, Albania Sha has a one-tier governance system. The corporate
governance of First Investment Bank, Albania Sha is a system with clearly defined functions, rights
and responsibilities at all levels - the Shareholder assembly, Steering council and its committees,
Audit committee, Directorate and structures at the Head Office and the branches. First Investment
Bank, Albania Sha offers a wide range of services in the sphere of corporate banking, lending to
companies, servicing individuals, card payments, payment and trade operations.
The Shareholder assembly - the highest governance body, allowing the shareholders to take
decisions on principle matters relating to the existence and the activity of the Bank.
Steering council (SC) - defines the strategy for development of the Bank manages the Bank by
resolving all issues within its scope of activity, except those within the exclusive competence of the
Shareholder assembly. It carries out the strategy for development of the Bank. The Steering
council is supported in its activity by committees (Credit Committee, Alco, HR Committee, Workout
Committee, Operational Risk Committee, Compliance Committee, IT Risk assessment Committee,
Anti-Fraud Committee) and which carry out their activities on the basis of a pre-determined written
structure, scope of activities and functions. The Steering council of Fibank Albania holds sessions
every month.
The Directorate carries out the management of the Bank by resolving all issues in its line of
business, except those within the exclusive competence of the Steering Council.
THE Annual Report FIBANK ALBANIA /2019 46

Human Capital
The policy of Fibank Albania on personnel management is oriented towards achieving long-term
correspondence between the personal goals of employees and those of the institution as a whole –
the fulfillment of the objectives and strategy of Fibank Albania, linking payment incentives with the
sustainability of achieved results and the reliable management of risks, and the affirmation of the
Bank as a preferred workplace for employees. It is based on the principles of transparency, the
prevention of conflicts of interest, accountability, and objectivity.
First Investment Bank, Albania carried out activities and aimed at motivating employees through
recognition, distinguishing and encouraging their contribution and achievements, as well as at
promoting business behaviors important for the success of the Bank.
Development of expert and social competencies of First Investment Bank employees was
accomplished through the implementation of an annual training plan, according to the business
objectives and identified needs. In order to maintain a high standard of service, excellent
professional skills and achieve effective results in attracting new customers, several significant
educational projects were realized during the year, including: Training of all agencies staff in head
quarter in order to improve all the knowledge and to learn new products or procedures of the Bank.
The training encouraged participants to reflect and improve their skills.
Cash Procedures and daily practices hold together all cashiers, deputies and branch managers and
was about the new practice of cashiers procedures and also for the new banknotes, realized by the
Bank of Albania.
WVP Top Invest Fund has the main purpose to improve the sales agent skills. This training required
the participation of the sales agents of all branches.
Customer Service Experience, the training that encouraged participants to reflect and improve their
sales approach. The training motivates a customer service-driven business model by putting the
customer as their ally, learning about who they are and what problems they need to solve. The
training also provided an opportunity to see issues and constraints in regards with the
communication techniques in the sales process, negotiation skill and the way how to apply
appropriate strategic negotiation tactics in sales procedure for their daily organizational process.
Annual training – AML/ASD/OLA/Risk/Cards/IT, training which requested the participation of all staff
of branches and some of Head Office departments and where important issues related to AML, IT
and some new procedures in accordance with the low in force were addressed.
As at 31.12.2019, the number of staff of First Investment Bank on a consolidated basis amounted to
218 employees against 183 a year earlier, the dynamics reflecting activities related to the
optimization of processes and resources, and adherence to a policy of synergy and optimal
efficiency.
Variable remunerations are based on performance results and the targets achieved in the long
term, using an evaluation based on financial (quantitative) and non-financial (qualitative) criteria.
As at 31 December 2019, the number of staff has a dynamic increase 218 compared to previous
year (2018: 183; 2017: 143; 2016: 140; 2015: 126) employees.
During the year, Fibank focused on motivating employees towards a higher contribution and the
achievement of individual and corporate objectives through enhancing their personal and
professional competencies in people management, customer service and sells, and the offering of
banking products and services.
THE Annual Report FIBANK ALBANIA /2019 47

Number of staff Personnel cost


250 350
218
183 300
200
140 143 250
126 150
200
100
150
50 100
- 50
2015 2016 2017 2018 2019 -
2015 2016 2017 2018 2019
Number of staff Personnel cost

Very good collaboration the Bank has with the training company “EPPC Albania & Kosovo” which
throught the delievered training encouraged participants to reflect and improve their sales
approach. The training motivates a customer service-driven business model by putting the
customer as their ally, learning about who they are and what problems they need to solve. The
training also provided an opportunity to see issues and constraints in regards with the
communication techniques in the sales process, negotiation skill and the way how to apply
appropriate strategic negotiation tactics in sales procedure for their daily organizational process.
Also Human Resources Department in cooperation with Albanian Association of Banks (AAB) &
ATTF has made possible to participate in training and certification for many of the employees from
Head Office inside and outside of Albania in order to be familiar with the latest changes and HR has
tried to distribute trainings for all departments. Some of the training are as follows: “Open banking
and PSD”, Digital banking evolution etc. OECD/IOPS Global forum on private pensions etc.
Participating on various workshops and conferences: Conference of the Bulgarian Oracle Users
Group (BGOUG), HR Hub Albania "InnoRecruit – Innovation in recruitment", etc.

CORPORATE SOCIAL RESPONSIBILITY


CSR is an evolving business practice that incorporates sustainable development into Fibank’s
business model. It has a positive impact on social, economic and environmental factors. As the use
of corporate responsibility expands, it is becoming extremely important to have a socially conscious
image. Recognizing how important socially responsible efforts are for our customers, employees
and stakeholders, Fibank’s 2019 focus was present in four CSR categories: Environmental efforts,
philanthropy, ethical labor practices and volunteering.

Philanthropy:
Fibank Albania in support of the Mother and Child Hospital Foundation
Fibank has continuously supported the Mother and Child Hospital Foundation. Today, in our Fibank
headquarters premises, we donated to the foundation all the gathered contributions from our
customers and staff members. The Foundation, together with members of the board of directors,
surly surprised us with recognition and flowers for all the support that Fibank Albania has given to
the Foundation. We wish more successes to the Director Mrs. Gerta Hagen and all its board
members with future projects in support of mothers and their babies in need!
THE Annual Report FIBANK ALBANIA /2019 48

October / Breast Cancer Awareness Month 2019


October is the breast cancer awareness month where each year Fibank has played a pivotal role to
raise awareness and raise funds to support different cancer causes. This year all the gathered
funds during October including the ones donated by the bank went for a Fibank staff member who
is battling with such a disease in order to support our colleague’s journey in defeating this illness.

MamiCare Center
In support of long-term Social Development Goals creating a long-lasting impact on providing
valuable community services, Fibank has sponsored the first social center project called MamiCare
for mothers and their newborns in Tirana! MamiCareCentre is a space where new and prospective
parents can develop parenting skills thanks to special training and fun activities. This newly created
social venture is managed by the Mother and Child Hospital Foundation, an organization that
supports maternity hospitals across the country, to provide favorable living conditions for newborns
and mothers in financial distress. At MamiCare, new mothers and fathers will receive information
about infant development and postnatal care. Specialists in this field will provide prenatal classes,
physical exercises and set up support groups for pregnant women. The cozy surroundings near
"Unaza e Re" are also suitable for kids play. MamiCare Center is especially accessible to mothers
in difficult economic conditions by offering free courses during pregnancy and after birth. Mothers,
as well as fathers, now have a reference point for every step that awaits them during the exciting
period of pregnancy and the first years of a baby's life.
THE Annual Report FIBANK ALBANIA /2019 49

Environmental efforts:
Donate a flower for Saranda!
Fibank congratulates and supports the beautiful initiative: "Donate a flower for Saranda!" Transfers
for this cause will be Commission Free! Our network will be available for this cause with the head of
the Fibank Saranda Branch! Our employees will be volunteers of this project. "Donate a Flower for
Saranda" is an initiative taken by Saranda youth with its main mission: "For a thriving city; For a
civic engagement to take an example; For a youth that tries to give the country hope; For a support
in “beauty” in a national level., was an initiative well supported by the Fibank Branch in Saranda.
THE Annual Report FIBANK ALBANIA /2019 50
Earthquake Relief Efforts
Albania was shocked by the devastated earthquake of November 26, 2020 where 50 citizens lost
their lives and many buildings were destroyed. Fibank was very quick to react by enabling donation
bank account numbers for businesses and supporters to donate. Our institution joined the Albanian
Association of banks donation fund and the Government relief fund to help and ensure the recovery
of those most affected by this natural cause disaster.

Fibank sponsors "Flower Festival" in Lezha


On May 9, 2019, in Lezha took place the "Flower Festival" organized at Restaurant Rapsodia
present in this event were different businesses from this city. This event was attended by our
branch network Mr. Arian Kovaci and Lezha who gave special importance to creating new business
connections and strength relations with current bank customers.

Fibank Fier sponsors “The other side of me”


Fibank supported the recital concert "The Other Side of Me" at the Bylis Theater in the city of Fier.
Fatjon Pula, a Top Talent Show finalist, gave the public indescribable emotions through piano
sounds and recitals from other local artists, including ballet performances.
THE Annual Report FIBANK ALBANIA /2019 51

Ethical labor practices:


Fibank Albania – Main sponsor of Bulgaria's National Day Event
The Bulgarian Embassy hosted its event on Bulgaria's National Day today, and Fibank has always
been the main sponsor of this event. The Ambassador of Bulgaria, Mr. Momchil Raytchevski and
Fibank Albania CEO, Mr. Bozidar Todorov hosted the reception with the participation of diplomatic
corps accredited in Tirana, senior officials of the Albanian government and Bulgarian supporters.
The largest Bulgarian investor in Albania is Fibank, a regional bank operating in the Bulgarian
market for more than 25 years being one of the most important players in terms of assets, loans
and deposits. Fibank is the largest Bulgarian bank and the third largest bank in Bulgaria with a total
of about 5 billion euros, a close to half of the total value of the Albanian banking system.
Throughout the years, its business profile has had positive developments, continuous growth and
quality customer service.
Fibank is aiming to highly focus on the Albanian banking system through increased presence in
Albania as well as the parent bank's expertise and knowledge in similar markets. Human capacities
are designed to expand the network and deliver innovative products and services to a dynamic
bank with very fast decision making in flexible products and services tailored for each client.

Fibank continuous supporter of the new generation


Fibank welcomes students to develop professional and teaching practices at our offices, not only in
Tirana, but also in other cities. The practice program is based on the cooperation of the Ministry of
Education, Sports and Youth. Fibank is very active in participating in employment fairs organized by
state institutions but also by universities themselves. The teaching and learning practice program is
rich in expanded information for the bank, where the intern is familiarized, in addition to information
on banking activity in theory but also in practice. Fibank's offers its maximum engagement, to
understand the potential of the new generation. The internship program lasts from 1 to 3 months.
The internship program includes knowledge of products and banking services at our branches,
including departments in our Headquarter Premises. Based on intern performance evaluation, we
recruit the best students, which are subject to recruitment processes for vacancies that open in
Fibank.
THE Annual Report FIBANK ALBANIA /2019 52

Fibank sponsor of folkloric festival of "Vratsa Spring" group at the Skampa Theater in
Vrasta, Bulgaria
In April, Fibank Albania carried out another sponsorship, this time in Bulgaria. On April 19-21, the
folk festival "Vratsa Spring" was celebrated in the town of Vrasta, about 100 km from the city of
Sofia. In this festival participated various artistic groups from the Balkans, part of which was also
the artistic group from the city of Elbasan. This participation was made possible thanks to the
contribution Fibank Albania offered to the Skampa cultural association.

Sponsor of 6th edition of “Dance with Me” in Klan TV


One important factor on the sustainable development goal number 3 is the ability for companies to
invest in the improvement of efforts to address the growing burden of non-communicable diseases,
including individual happiness and sports. Fibank has for the second consecutive year sponsored
the show “Dance with Me” in Klan TV as a show that promotes sports through dancing by improving
audience happiness through different VIP dance performances. Fibank is very careful to promote its
products only on TV Shows that promote good health and wellbeing.
THE Annual Report FIBANK ALBANIA /2019 53

Volunteering:
Red Cross Albania - Blood donation
On October 2nd, Fibank Albania joined Red Cross Albania by organizing a day of blood donation at
its main premises. Fibank staff, but also external donors, responded to our public call in all our
social media channels to contribute in donating blood. Fibank has turned this cause into a yearly
tradition as a main blood donor to continue its mission to help this vulnerable part of society and
further strengthen the general awareness for all the people in need.

Tirana Marathon
On October 13 2019, Fibank Albania became part of the 4 th edition of the Tirana Marathon 10 and
21K. With a participation of over 2,500 contestants of different ages from 40 different countries, this
event was rated as the biggest and best organized sporting event of the capital and not only. Fibank
Albania was represented by 10 staff members with an excellent performance in the top who ran for
the category 10 and 21K
THE Annual Report FIBANK ALBANIA /2019 54
CyberCon Albania
It is vital to give a central place to strengthening education’s contribution to the fulfilment of
technological advancement, cybersecurity, by enabling security in an ever-growing virtual reality.
The content of such education must be relevant, with a focus on both cognitive and non-cognitive
aspects of learning organized by the Canadian Institute of Technology in collaboration with ICT
Academy and Ecronex Media. This initiative was sponsored by Fibank Albania in support of the
month of European Cyber Security.

PUBLIC RELATIONS
Through our PR practices we deliberately manage the spread of information between our
organization and the public. Fibank has continued to increase its presence in the Albanian market
with the expansion of its branch network in two new locations in Tirana such as Unaza e Re and
Bulevardi Zogu I and a remodeled new location of the existing branch in the city of Shkodra.
Another important highlight during 2019 was the partnership agreement with Rural Credit
Guarantee Foundation in Albania which aims to facilitate the lending process for micro, small and
medium-sized enterprises. An outstanding initiative of Fibank was the issuing of a 7-year bond at
the amount of 2 Million Euros.

New Branch Opening Unaza e Re & Bulevardi Zogu I! Fibank Albania continues to expand its
presence in the Albanian market
Year 2019 started with the opening of two Fibank branches in Tirana. The new branches are
located in Unaza e Re & the “Zogu I” boulevard and it is the culmination of an unremitting work of a
team highily committed to success.
During the year we left behind, Fibank has been one of the most active banks in the market. It has
inaugurated 4 new branches throughout 2018. This is an additional confirmation of an already
consolidated position of Fibank in the Albanian banking system.
“We are seriously committed to serve our customers, wherever they might be, with any tool at hand,
aiming to offer them a highily qualified service and to ease their every step with finances.” says Mr.
Bozhidar Todorov – Chief Executive Officer of Fibank Albania.
“We truly believe in a mutual partnership not only with our existing customers but also with potential
ones who are seeking a strong and trustworthy support for their daily ventures.”
Fibank Albania is without any doubt one of the most active banks in the field of lending to
individuals and businesses, offering some of the best conditions in compliance with the needs and
requests of its customers. In addition to this, the interest rates of deposits are amongst the most
THE Annual Report FIBANK ALBANIA /2019 55
competitive and attractive in the Albanian market.

Fibank Branch Shkoder – New Offices exclusively!


The modern installation of the new Fibank Shkoder branch office, located in the city center, offers a
warm environment for the clients together with a motivated and dedicated team to all interested
customers.
"Fibank is a growing corporate and we are committed to be wherever the customers are, aiming to
provide a great service in function of their needs and requirements. For us, it is very important the
trust that our clients have in our bank. We take care that this trust is reflected in every aspect of our
services towards our clients, also we are highly motivated to engage in social responsibility
frameworks to contribute to projects or initiatives for the benefit of the community we serve” - said
Shkodra Branch Manager - Dritan Meta.
Fibank Albania continues to be among the most dynamic banks in the country. With the advantage
of fast decision making, Fibank is very active in lending both for individuals and businesses, offering
the most favorable conditions, in accordance with the needs and requirements of customers. Our
dedicated employees aim at increasing a customer base by paying special attention to each
customer, serving them with excellent services and high-quality products to achieve a positive
organic growth.
THE Annual Report FIBANK ALBANIA /2019 56
Fibank successfully issues the 7-year Bond at the amount of 2 Million Euros.
Fibank issued its first bond at the amount of 2 Million Euros through a private offer.
The Albanian Financial Authority approved the prospectus introduced by Fibank. The prospectus
reflected the issuing of the 7-year bond in Euro, with an interest rate of 4.5% a year.
"Fibank it's the second bank in Albania which issues its own bonds. This way it preserves its role as
a pioneer in the Albanian financial market as well as continues to give its contribution to the
development of the capital market in the country. The initiatives of Fibank in this aspect are quite
evident and are continuously increasing. It is not quite by chance that for many years now Fibank
has been the only custodian bank for Pension and Investment funds." - said Elma Lloja, Executive
Director at Fibank.

Partnership with Rural Credit Guarantee Foundation in Albania


Fibank Albania is strongly supporting the lending process in the country through all possible ways of
cooperating with relevant institutions, being the fastest growing bank in loan portfolio. On December
11, Fibank Albania signed a partnership agreement with the Rural Credit Guarantee Foundation in
Albania. We are focused on customer service for micro, small and medium enterprises by
developing products and services tailored to each category. This partnership is based on the
policies of KFW, the German state-owned development bank that aims to facilitate the lending
process for micro, small and medium-sized enterprises. Fibank is constantly demonstrating its
commitment to SMEs in support of these initiatives aimed at boosting the economy at large.
THE Annual Report FIBANK ALBANIA /2019 57

Promotions
2019 promotional mix provided an added value to consumers through in branch advertising, direct
sales, personal marketing, publicity and social media channels in order to simulate sales. Our
product promotions aimed to attract new customers, to hold present customers, to counteract
competition and to take advantage of different market researches throughout the year. An important
product was consumer loan “for every purpose”, the launch of the new contactless cards both debit
and credit, fast loan for holidays, yearly promotion with booking.com partnership, different social
media engagements such as #Unedua and a physical person’s package for all new businesses who
open a bank account with Fibank. Below our main promoted products.

Fibank Albania offers loans “For every purpose” with very flexible conditions
The latest product offered from Fibank Albania is “Loan for every purpose” to all individuals with
flexible conditions tailor made as per the customer conditions.
Loan for every purpose is a great opportunity for everyone with an interest rate starting from 1.9%
combined with flexibility in the required documents and releasing the customers from life insurance
request as there is no life insurance applied for this type of loan. Another release for the customers
is that the collateral is not necessary to be only in the name of the borrower. This condition opens
new opportunities to everyone that would like to find a finance for his purposes.
This product provides flexibility in the investment plan and is intended to cover the financial needs
of the clients with stable incomes, good status and good collateral location who are willing to take
loans. Every interested person except the visit in the branch may also apply online, saving a lot of
time and burden. Specialized loan officers are analyzing the case and contacting the interested
customer in order to proceed further as per the client's needs.
Fibank Albania has designed this product as per its strategy of being a front runner exploiting the
opportunities in the market. Fibank team is dedicated to increase the customer base by paying
special attention to every client, serving to good potential customers with excellent service and very
qualitative products in order to reach a remarkable organic growth.
THE Annual Report FIBANK ALBANIA /2019 58

Fibank Albania launches the newest product on the market - Contactless Cards!
The latest product launched by Fibank Albania is the "Contactless" card.
Contactless cards are a great opportunity for anyone, as they make payments faster, easier, just by
tapping the card at the respective reader to pay in a second. Another advantage for the client is the
fact that contactless cards are even safer than the previous technology because they are equipped
with multiple layers of security to enable protection against potential fraud.
Contactless cards have a chip inside them that emits wave. An antenna is built into the plastic to
secure the connection with a contactless reader. This is known as radio frequency identification
(RFID) technology.
"This product offers flexibility in everyday consumer life and aims to improve continuously through
innovative technology. For all consumers who travel frequently contactless cards enable fast
purchase of services in major metropoles such as London, Paris, Athens, Rome, etc. The
contactless card is more secure than the generation of past cards, enabling broadcasting in an
encrypted way, "says Head of Card Department, Mr. Erion Maxhari.
Fibank invests continuously in the field of technology so that the services provided make it easy for
the lifestyle of its customers.
THE Annual Report FIBANK ALBANIA /2019 59
Fast loan for holidays - only from Fibank!
Fibank Albania, in cooperation with Vas Tour Operator or its subcontracting agencies, kicks off
summer season with a product dedicated to all those who wish to travel to their desired
destinations!
"Fast Loan for Holidays" is a great opportunity for all of you who want to spend your vacation
without affecting your personal savings. It is a fantastic product with Zero interest and moreover,
health insurance for the travel period is covered by Fibank.
Any person interested in spending their vacation at any distant destination or if they realize that they
have extra costs from what they have initially anticipated, they can visit Vas Tour Operator Travel
Agency, book the desired package, and pay their vacations through Fibank. It's that fast!
This product is provided with 0 interest to all individuals who are employed in different state or
private institutions or have easily verifiable incomes. The loan passes through a bank transfer
directly to the travel agency’s account.
Fibank is always close to you as your most dynamic partner, with dedicated products, helping you
to meet your requirements and fulfill your dreams at any moment.

Fibank & Booking.com a unique partnership


Ready for vacation?
When you book at http://travel.fibank.al you will be reimbursed on your card account up to 7% of the
total purchase! At http://travel.fibank.al you can find all the hotels that Booking.com offers all over
the world. Thanks to a unique partnership between Fibank & Booking.com, the cardholders can
benefit from fantastic offers, up to 7% discount on the total value.
Once you book the hotel with the Fibank card, the hotel confirms your stay and Fibank deposits in
your card up to 7% of the spent amount.
Such a great reimbursement deal once you are back from vacation!
Having a bank card is a very good commodity in our everyday life. You can easily make online
purchases, you can book plane tickets, pay restaurant dinners, shop in shopping centers and
THE Annual Report FIBANK ALBANIA /2019 60
certainly withdraw money at any VISA ATM all over the world.
Fibank offers secure cards that adds value to your financial resources!

Social Media Online


#UneDua
Cities are hubs for ideas, commerce, culture, science, productivity, social development and much
more. Common urban challenges include congestion, lack of funds to provide basic services, a
shortage of adequate housing, declining infrastructure and rising air pollution within cities.
Fibank Albania launched a Social Media game in all its major cities that Fibank is present in order to
raise awareness on better money habits. They were invited to share their wishes of what they would
purchase if they were granted a bank loan. The game resulted successful in achieving most of #11
sustainable development goals.

Physical Persons Package


A successful sustainable development agenda requires partnerships between governments, the
private sector and civil society. These inclusive partnerships built upon principles and values, a
THE Annual Report FIBANK ALBANIA /2019 61
shared vision, and shared goals that place people and the planet at the center, are needed at the
global, regional, national and local level.

The UN International Day of Older Persons


The UN International Day of Older Persons was an opportunity for Fibank to highlight the important
contributions that older people make to society. The theme for 2019 was “The Journey to Age
Equality”. Fibank wished all his gold age customers with kind gesture of contributing funds into their
pension bank accounts by wishing them good health and wellbeing. Ageing healthily is what we all
aspire to!
THE Annual Report FIBANK ALBANIA /2019 62
#Takohemi ne…#Antalya, #Istambul
A successful sustainable development agenda requires partnerships between governments, the
private sector and civil society. These inclusive partnerships built upon principles and values, a
shared vision, and shared goals that place people and the planet at the center, are needed at the
global, regional, national and local level. Such is the new partnership of Fibank Albania with Globus
Travel to bring a great opportunity to customers to book their travel holidays with zero interest rates
for these types of consumer loans.

Branch network
Branch network at 31 December 2019 had a total of 1 branch and 13 agencies and Head Office.
Head office, Tirana 1 branch and 3 agencies are in Tirana and other agencies in the cities: Durrës,
Fier, Vlorë, Elbasan, Korçë, Shkodër, Berat, Lezhë, Lushnje, Sarandë.
THE Annual Report FIBANK ALBANIA /2019 43
ORGANISATION BUSINESS STRUCTURE, FIBANK ALBANIA SHA

Shareholder Assembly

Audit Committee

Internal Audit

Steering Council

Credit Committee Operational Event Risk Committee

ALCO Compliance Committee

HR Committee IT Risk Assessment Committee

Workout Committee Procurment Committee


Chief Executive Director
Antifraud Committee Change Control Committee

Executive Director Procurator

Information
security

Operational &
Information Finance Administration Marketing & Human Risk Payments &
Branch Card loan Treasury SME Retail Legal
technologies accounting & security PR recources management corresponden
network department admin.depart department department department department
department department department department department department t banking
ment

Custody & AML


Blocking Collection
depositary compliance
accounts unit unit
unit unit
THE Annual Report FIBANK ALBANIA /2019 44

Steering Council
THE Annual Report FIBANK ALBANIA /2019 45

Mr. Nedelcho Nedelchev - Chairman and Member of Steering council of Fibank, Albania
Chairman of the Steering council and Chief Executive Director of Fibank, Bulgaria
Mr. Nedelcho Nedelchev was appointed Chief Executive Officer (CEO) and Chairman of the Management
Board of First Investment Bank AD in May 2017. During the 2007-2012 period Mr. Nedelchev was
member of the Supervisory Board of First Investment Bank AD, and in 2013 he managed the project of
acquisition of Unionbank EAD, and was member of its Supervisory Board until its merger into Fibank.
Mr. Nedelchev started his career in the Aval In brokerage house. In 1997 he was financial analyst in First
Financial Brokerage House OOD, was soon thereafter promoted to Head of Analysis, and in 2001 became
one of its managers. In 2003 he was appointed Deputy Minister of Transport and Communications of the
Republic of Bulgaria, and in the 2003-2005 period was also Deputy Chairman and Chairman of the Board
of Directors of Bulgarian Telecommunications Company AD. From September 2005 to March 2006, Mr.
Nedelchev was an adviser to the Minister of State Administration. During his professional career he has
been involved in the management of a number of companies operating in the energy and
telecommunications sector in Bulgaria, as well as in the field of financial consulting.
Mr. Nedelchev holds a Master's degree in International Economic Relations from the University of National
and World Economy in Sofia and has professional licenses and certifications in the field of international
financial and commodity markets, investment services and activities, management, business planning,
issued by internationally recognized institutions such as the World Bank, the Wholesale Markets Brokers’
Association (London) and others.
Apart from his position in the Bank, Mr. Nedelchev is also manager of Debita OOD and Realtor OOD.
Starting from April 2018, he’s appointed Chairman and member of Steering council of Fibank, Albania.

Chavdar Zlatev (Member)


Director of Corporate Banking Department of Fibank Bulgaria
Mr. Chavdar Zlatev joined Fibank’s team in 2004 as a senior specialist in the SME Lending Department.
Soon after that he was promoted to deputy director of the same department. From 2006 to 2009 he was
manager of the Fibank’s Vitosha branch. Subsequently he was appointed as a deputy director of the
Branch Network Department and in 2010 Mr. Zlatev was promoted as a director of the same department.
Since the beginning of 2011 he has been director of the Corporate Banking Department.
Previously, Mr. Zlatev had worked as a senior banking employee “Corporate clients” in Commercial bank
Unionbank AD. He holds a Master’s degree in Macroeconomics from the University of National and World
Economy, Sofia.
Besides his position in Fibank Bulgaria and Fibank Albania, Mr. Zlatev is also a member of the Board of
Directors of Health Insurance Fund FI Health AD.
THE Annual Report FIBANK ALBANIA /2019 46

Stanimir Mutafchiev (Member)

Mr. Stanimir Mutafchiev joined Fibank’s team in 1999 as a Legal Adviser in the Legal Department. Soon
after that he was promoted to Chief Legal Adviser and he was promoted to Head of Legal Department in
2003. Besides his position in the Fibank, Sofia Bulgaria Mr. Mutafchief was also Deputy Director of
National Union of Legal Advisers, Director of First Investment Finance BV, Hollande and member of
Supervisory council of Unibank, Macedonia. From June 2013 he’s member of Steering Council of First
Investment Bank, Albania Sha.

Nikolai Dragomirevski (Member)


Executive Director of “Ecobultech AD” Sofia, Bulgaria
Mr. Nikolai Dragomirevski is also member of Supervisory Board of “Universal Investment Bank” in
Republic of North Macedonia. In 1994 hebegun his career as commissioner near “First financial brokerage
house” and from 1995 until 2001 hold a position of deal neaby Monetary Market Department of “First
financial brokerage house”. Soon after that in 2001 he was promoted as a chief dealer and hold this
position up to 2011.
Mr. Dragomirevski holds a Master’s degree in Economics from the University of National and World
Economy in Sofia.

Petya Stoyanova (member)

Petya Stoyanova has occupied different management positions for more than 10 years. The positions are
considered to be complex, combining the responsibilities for the operations excellence, the strategic
achievements as well as engagements with current and future customers from various countries and
industries.
For the last over 3 years, Petya Stoyanova is a Bid Manager for DXC Technology (formed by the merge of
CSC and the Enterprise Services business of Hewlett Packard Enterprise Company, previously part of
Hewlett-Packard Company), the world's leading independent, end-to-end IT services company, serving
private and public sector clients from various industries across 70 countries.
In addition to the above, within her previous experience, she has occupied the position of Head of Retail
department in First Investment Bank Albania for 6 years. One of the main initial objectives of the position
was to structure and set up the Retail department which proved successful over time. In addition to her
contribution to the establishment and the development of the Retail department, she has been part of
different internal projects and contributed to the implementation of improvements in other departments
(products, processes and procedures). From March 2018 she's member of Steering Council of First
Investment Bank, Albania Sha.
THE Annual Report FIBANK ALBANIA /2019 47

Directorate of
Fibank Albania
THE Annual Report FIBANK ALBANIA /2019 48

Bozhidar Todorov - Chief Executive Officer


Mr. Bozhidar Todorov was appointed as CEO of Fibank Albania in October of 2007 after 11 years of
successful banking experience. Previously, he held a position as Director of "Impaired assets and
provisioning" Department for First Investment Bank Bulgaria.
Earlier, Mr. Todorov had worked as a senior corporate loan officer, reporting and customer service for
Fibank and Tokuda Bank Bulgaria. He holds a Master's in Finance from the University of National and
World Economy in Sofia.
In the Bank he is responsible for the Finance and Control Department, SME and Retail Banking
Department, Administration and Security Department as well as Marketing and PR Department. He is
focused on implementing a customer oriented and strategic business development in Fibank Albania
and there is a significant progress in the bank during these last years.
In addition to his position in the Bank, Mr. Todorov, is Vice Chairman of the Supervising Board of MKB
Union Bank since October 2013. Furthermore, Mr. Todorov is a member of Executive Committee of
Albanian Association of Banks and also since February 2011, Chairman of Bulgarian - Albanian
Chamber of Commerce and Industry.

Elma Lloja - Executive Director


Mrs. Elma Lloja joined Fibank Albania in 2007 as Head of Treasury and Custody Department. In
December of 2013 Mrs.Lloja was appointed as Executive Director of Fibank Albania.
She has a long experience in the banking sector for more than 20 years. Prior to joining Fibank Mrs.
Lloja has worked for Savings Bank of Albania and afterwards with Raiffeisen Bank Albania. She has
gained a considerable experience in banking. Her last position with Raiffeisen Bank was as Chief
Dealer for the Treasury Department.
As Head of Treasury and Custody Department at Fibank Albania, Mrs. Lloja was responsible for
Treasury activities and for the Retail banking related to deposit products and their pricing. She is a
member of Assets-Liability Committee. Mrs. Lloja established the new structure of Custody and
Depository unit in Fibank. She managed the full process for obtaining licenses on behalf of the bank
to act as Custodian of the Pension Fund and Collective Investment Undertakings.
As Executive Director of Fibank Albania, she is responsible for the Treasury and Custody
Department, the Branch Network, Information & Technology Department, Card Department as well
as Operational and Loan Admin Department.

Ina Paskaleva - Head of Risk Management (Procurator)


Mrs. Paskaleva has spent more than 20 years in the Banking system and financial markets with
international banks in Bulgaria and South-eastern Europe. She joined Fibank Albania in 2006 as
Head of Risk Management. Technical know –how in the areas of credit and risk management,
capital markets and financial instruments, compliance and corporate governance. Post graduate
level education in banking and finance in Wisconsin University, US and Exeter University, UK. She
held several management positions as: Country Manager, Credit and Risk Management division, in
Raiffeisen Bank, Albania; Head of Risk Management, at Bank of Austria (Hebrosbank AD), Sofia,
Bulgaria; Country Director for Bulgaria, Demirbank, Istanbul, Turkey, Senior Corporate banking
manager with ING bank, Sofia, etc.
THE Annual Report FIBANK ALBANIA /2019 50

Business Overview
THE Annual Report FIBANK ALBANIA /2019 51

Deposits
Year 2019 was an important year for deposits in the banking system because it reached a good
level of stability and during 2019 the deposits in banking system are increased by ALL 29.56 billion.
Fibank Albania attracted funds during 2019 were increased by 27.78% (2018: 20.77%; 2017:
7.10%) and reached ALL 26,588,459 thousand (2018: ALL 20,807,370 thousand).

Customer Deposits
28,000
in '000 ALL
24,000
20,000
16,000
12,000 Individuals

8,000 Entities

4,000
-
2015 2016 2017 2018 2019

Deposits from individuals increased by 17.75% and amounted ALL 21,735,753 thousand (2018:
ALL 18,458,733 thousand; 2017: ALL 15,625,655 thousand). The due to term deposits were
increased by 15.68% (or ALL 1,930,477 thousand) reaching ALL 14,245,688 thousand (2018: ALL
12,315,211 thousand; 2017: ALL 10,090,061 thousand) retaining a share of the attracted funds
from individuals at 65.54% (2018: 66.72%; 2017: 64.6%) and due to a increase in demand deposits
by 15.74% reaching ALL 5,521,477 thousand (2018: ALL 4,770,719 thousand; 2017: ALL
4,360,099 thousand).

Deposits from individuals by Deposits from individuals by


type currency
24,000 25,000
20,000 20,000
16,000 15,000
12,000
10,000
8,000
4,000 5,000
- -
2015 2016 2017 2018 2019 2015 2016 2017 2018 2019

Term and savings accounts Current accounts In ALL In EUR In other currency

Deposits from entities recorded a significant increase of 106.62% compared to prior year and
reached ALL 4,852,706 thousand (2018: ALL 2,348,637 thousand; 2017: ALL 1,604,501 thousand).
The increase in deposits from entities came as a result of movement in current accounts which
increased by 114.85% or ALL 2,847,342 thousand (2018: ALL 1,325,241 thousand; 2017: ALL
841,451 thousand), with also an increase in term deposits with 95.95% amounted ALL 2,005,364
thousand.
THE Annual Report FIBANK ALBANIA /2019 52

Entities by type Entities by currency


5,000 5,000
4,000 4,000
3,000 3,000
2,000 2,000
1,000 1,000
- -
2015 2016 2017 2018 2019 2015 2016 2017 2018 2019

Term and savings accounts Current accounts In ALL In EUR In other currency

Fibank Albania’s policy was to offer to its clients a variety of flexible deposit products aiming to meet
customers demand for low-risk savings instruments, by focusing on maintaining high standards of
customer service. Deposit products are tailored to different segments of clients which could choose
products that offer a good combination of high return and flexibility in depositing and withdrawing. In
addition Fibank Albania offered products with a variety of maturities and interest payments or full
access to their funds at any time without any limitations or cost.

Retail Lending
The portfolio of loans to individuals to total lending portfolio is 39.7% as at the end of December
2019. The portfolio of loans to individuals increased by ALL 1,613,528 thousand reaching a total
value of ALL 6,080,542 (2018: 4,467,103 thousand; 2017: 2,893,988 thousand). The growth results
from ALL 305,745 thousand increase in consumer loans, ALL 1,251,158 thousand in mortgage
loans and ALL 56,625 thousand in credit cards. The number of consumer loans as at the end of
December 2019 was increased due to preferential terms and conditions offered. Consumer loans
covered with Treasury Bills or Treasury Bonds continued to be in good level of request. Different
consumer loan conditions were tailored for different company’s clients and promotions. In general,
the credit standards eased on consumer loans.
Mortgage loans reached ALL4,549,610 thousand (2018: 3,298,452 thousand, 2017: 2,062,438) as
at the end of December 2019, constituting an increase of 37.9%, compared to the end of the
previous year. The share of the mortgage loans in the portfolio of the loans to individuals increased
at 74.8% (2018: 73.8%; 2017: 71.3%). Mortgage loans has an increase in nominal value almost
four times higher than consumer loans.
The achievements in mortgage loans were influenced by the market changes that the banking
sector faced last year. The fast and flexible procedure and decision-making process as well as the
terms and conditions offered for the mortgage loans continued to be preferential. The mortgage
product “5 stars”, which was reviewed different times, continued to be very competitive. The product
offers a one- or two-years period with a fixed interest rate and floating interest rate after, the longest
loan term in the market, preferential fees and commissions, a credit card as a bonus. The consumer
loan will collateral “Any purpose” offers the possibility to finance every need, with preferential terms
and conditions compare to the market.
THE Annual Report FIBANK ALBANIA /2019 53

Retail banking Loans/ deposits ratio for retail


6,750 30.0%
banking 28.0%
6,000
24.2%
5,250
in ALL millions

25.0%
4,500
20.0% 18.5%
3,750 Loans/
3,000 14.5% deposits
15.0% 12.9%
2,250 ratio for
1,500 10.0% retail…
750
- 5.0%
2015 2016 2017 2018 2019
0.0%
Consumer loans Mortgage loans Credit cards 2015 2016 2017 2018 2019

Consumer loans increased by 32 % and reached ALL 1,274,816 thousand compared to ALL
969,071 for the previous year. The share of the consumer loans in the portfolio of the loans to
individuals is 21 % as at the end of December 2019 (2018: 21.7%; 2017: 22.8%).
During the year, we continued to advertise Consumer loan “Limited Offer” with a maximum amount
of ALL 1,500 thousand and a maximum maturity of 84 months. The offer featured some preferential
terms and conditions like no fees including application, renegotiation and early repayment. The
conditions are reviewed during the year, resulting in more flexible and facilitating the lending
requirements. The “VIP” consumer loan is offered with a twelve-month period or 2 years with fixed
interest rate and floating interest rate after, preferential and flexible terms and conditions.
Credit cards increased by 28 % and reached ALL 256,116 thousand at the end of December 2019
(2018: 199,491 thousand 2017: ALL 171,440 thousand). The portfolio of credit cards is at 4.2%
share in the portfolio of loans to individuals (2018: 4.5%; 2017: 5.9%).
The increase in loan/deposits ratio is due to a higher growth rate of loans compared to the growth
rate of attracted funds. The growth of the portfolio of the loans to individuals was supported by the
professional teams of every branch and office of the Bank. The constant trainings and the
improvements in the internal procedures facilitated the smooth and successful process of lending.
In addition, the product definitions were reviewed on a regular basis to ensure the competitive
position of the bank in the retail lending sector.

SME Lending
SME client’s portfolio increased with 17.8% during 2019 and reached 9,242,035 thousand, (2018:
ALL 7,848,101 thousand; 2017: ALL 7,281,769 thousand). This increase comes mainly for loans
granted in Tirana, Fier, Berati and Korca area. This result comes due to market conditions, efforts
done from newly hired and existing sales force and the positive impression left in the market from
Fibank. The aggressive strategy of the Bank to increase the market share and the fact that many
Banks are not active for the moment facilitated the increase process. Big number of the new clients
is referred from the existing performing clients, due to the very positive collaboration with our Bank.
The Bank focus was in maintaining the existing good portfolio, granting new loans for low risk
clients and reviewing the conditions of the clients in difficulties and collection.
In order to support SME clients and increase their capacity to access financing in the current
economic environment, Fibank Albania extended its lending product portfolio, offering to the
customers with good turnover in their accounts special products with very good interest rates in
Euro and in ALL. Meantime the preferential operational offer (half of the standard prices) is still
offered to new clients and to the good existing portfolio.
THE Annual Report FIBANK ALBANIA /2019 54

Small and medium enterprises Interest income from sme loans


10,500 600
9,000

in ALL millions
7,500 450
6,000
Small and 300
4,500
medium
3,000 enterprises 150
1,500
- -
2015 2016 2017 2018 2019 2015 2016 2017 2018 2019

During 2019 SME interest income reached ALL 550,400 thousand (2018: ALL 545,727 thousand;
2017: ALL 434,543 thousand).

SECTOR OF INDUSTRY
Construction 4.7% Finance
10.9%
Trade
Agriculture
31.3%
3.0%
Transportation
6.2%
Tourism
4.5%

Industry Communication Services


19.3% 0.1% 20.1%

The predominant share of loan portfolio is still formed by trade sector at 31.3% followed by Services
20.1%, industry at 19.3% and construction sector at 10.9%. Comparing to the portfolio of 2018,
there is an increase of the Services and Industry sectors.

Card Payments
Our focus during 2019 was to promote credit cards and debit cards to potential customers by
offering excellent value proposition and benefits in an excellent service.
During the year we issued contactless cards. In the beginning of 2019 Fibank was the first bank
which started issuing contactless cards with the latest technology. This upgrade was offered free of
charge to cardholders who embraced it by adopting daily purchases with this tap and pay
technology without entering PIN for amounts up to 4500 ALL.
For all the clients who have already an existing credit card in other banks we offered a pre-
approved credit card “Half cost” with special conditions. The interest rate and annual commission
were the lowest in the market, half of the average interest rate and annual commission of the other
banks.
Our partnership with booking.com continued and more travelers benefit from discounts using
Fibank cards. The portal www.travel.fibank.al was frequently contacted by Cardholders and has
increased satisfactions and the number of online transactions.

The credit cards products continue to be competitive in the market, offering preferential fees and
THE Annual Report FIBANK ALBANIA /2019 55
commissions, the best interest rates, the shortest period to deliver the card to the client.
The number of active debit cards has been in a stable growth as well as the number of credit cards.
The transaction volume of the credit cards increased with 132% compared with 5 years ago (2015)
and 37% compared with 2018. Meanwhile the transaction volume of debit cards has increased with
67% compared 8ith 5 year ago and 30% compared to 2018.
The transaction volume of the credit cards has increased with 37% from the previous year EUR
4,713,208.
The transaction volume of the debit cards has increased with 30%, EUR 4,966,078 compared to
previous year.

Transactions Volume Credit cards Transactions Volume Debit cards


in '000 ALL in '000 ALL
2,500,000 2,750,000

2,000,000 2,200,000

1,500,000 1,650,000

1,000,000 1,100,000

500,000 550,000

- -
2015 2016 2017 2018 2019 2015 2016 2017 2018 2019

Gold and Commemorative Coins


Fibank Albania offers a wide range of gold products as per the business development of precious
metals from Fibank AD. Fibank Albania imports these products directly from Fibank AD which has
already established a successful cooperation with many leading well-known institutions worldwide
like Swiss mint PAMP (Produits Artistiques de Métaux Précieux), UBS and Credit Suisse, the New
Zealand Mint, the National Bank of Mexico, the Austrian Mint, the British auction house SPINK, and
others.
Fibank Albania offers products of the precious metals as coins, bars, medals and medallions. The
distribution of a new gold investment coin from the New Zeland Mint started at the beginning of
2011.

Payment Services
Fibank Albania carries out its activity related to money transfers and other payment services in
compliance with Albanian legislation, including the Regulation No.55 “On the function of Albanian
Electronic Clearing House – AECH”, the Regulation No.53 “On the function of Albanian Interbank
Payments System – AIPS”, the Decision No.12 dated 23.02.2011 “On the adoption of some
amendments in the Regulation “On the functioning of Albanian Interbank Payment System – AIPS”
and “On the functioning of Automated Clearing House System – AECH”.

Currently, Fibank Albania is a member and participant in the payment systems, central securities
THE Annual Report FIBANK ALBANIA /2019 56
depository and agent of other payment service providers, as follows:
Real-Time Gross Settlement System (AIPS)
Automated Clearing House System (AECH)
Society Worldwide Interbank Financial Telecommunication (SWIFT)
Albanian Financial Instrument Settlement and Registration System (AFISAR)
MoneyGram Agent
Regarding outgoing transfers in foreign currency done in 2019, their respective number ordered by
Fibank customers increased by around 40% compared to 2018, also the number of incoming
international transfers in favor of the clients of Fibank increased by around 23% compared to 2018.
Regarding domestic money transfers in local currency in 2019 the number increased around 95%
for outgoing transfer, and 43% for incoming transfers in favor of our clients, compared to 2018.
The increase in number of transfers was due to the increased customer base, the competitive
conditions offered by the Bank and the high quality of customer service.

Compliance and AML


AML Compliance Unit carries out activities of identifying, assessing and managing the risk of non-
compliance, ensures adequate and legitimate internal regulatory framework on money laundering
and terrorist financing prevention, and other financial crimes and ensures that the Bank is in full
compliance with the relevant laws and regulations in force.
The Bank has implemented the Annual AML Compliance Plan, which aims to identify, assess and
mitigate risk of money laundering and terrorism financing. The Bank performs annual risk
assessment of AML/CFT activities, by means of proper customer data verification, due-diligence
and enhanced due-diligence policies and procedures, by developing systems to detect, monitor and
report the riskier customers, suspicious transactions and economic sanctions screening, which
along with the culture of the corporate are decisive in risk mitigation towards financial crime and
unethical behaviors.
The Bank has developed a compliance function, which main objective is to identify, assess, monitor
and report the risk of non-compliance. The Compliance function includes the Head of Risk
Management, AML Compliance Manager, Head of Legal, Head of International Payments and
Correspondent Banking, Chief Financial Officer in the quality of members of Compliance
Committee. Compliance Committee is established to ensure ongoing Bank compliance with all
applicable laws, regulations, standards, internal policies, procedures and processes concerning the
Compliance function.
AML trainings

AML trainings directed to Front Office staff (Branch Managers, Deputy Branch Managers, Persona
Bankers and Cashiers) with the participation of representatives from the General Directorate for the
Prevention of Money Laundering are performed on annual basis. The training is focused in the
functional and operational point of view of Datamax system from branches, including AML
procedures: KYC forms, reporting to AML Unit workflow, High-Risk categorization etc.
Trainings organized by AAB (Albanian Association of Banks) -Several trainings were organized by
Albanian Association of Banks related AML/CFT activities in the banking sector.
THE Annual Report FIBANK ALBANIA /2019 57

Depositary and Custodian Services


In its capacity as an investment intermediary of government securities, Fibank carries out
transactions with financial instruments in the country including transactions of government
securities, as well as money market instruments. The Bank also offers custodian services to private
individuals and corporates, including maintaining registers of accounts of securities, and servicing
payments under transactions in financial instruments.
Fibank Albania custodian activities are in compliance with Bank of Albania and Financial
Supervision Authority regulations, which ensure a higher level of protection for non-professional
customers. Custody & Depositary Unit is the unit which controls the custodian services and ensures
the observing of the requirements regarding Fibank’s activity as an investment intermediary and
custodian.
At the end of 2019 funds under Custody amounted in ALL were: ALL 74,509,542 thousand (ALL
61,825,258 thousand in ALL; ALL 12,191,058 thousand in EUR and ALL 493,226 thousand in
USD) compared to ALL 75,145,108 (ALL 62,040,785 thousand in ALL, ALL 12,655,792 thousand in
EUR and ALL 448,531 thousand in USD) at the end of 2018, (2017: ALL 64,905,428 thousand in
ALL, ALL 16,797,566 thousand in EUR and ALL 295,526 thousand in USD.

Funds under custody


in mln' ALL
80,000

60,000

40,000

20,000

0
2015 2016 2017 2018 2019
USD EUR ALL

Fibank Albania has given continuous support and contribution to update information on the
performance of the Government Securities yield in its branches, intending to provide accurate and
explicit information to its customers and encourage their participation in the primary and secondary
market.
Fibank Albania was the first bank in Albania licensed by Financial Supervision Authority as
Depositary of Voluntary Pension Fund (August 2010) and as Depository (Custodian) of Collective
Investment Undertakings (end of 2011). This service and other services to be provided in a near
future are part of our efforts and goals to become part of the domestic market developments.
In 2019 Fibank Albania continued to offer depositary service to two asset management companies
that manages collective investment undertakings and voluntary pension funds.
The agreement with Raiffeisen Invest Albania, the biggest management company in Albania, was
signed on October 2010 for Raiffeisen Pension Fund and on February 2012 for the investment
funds Raiffeisen Prestige and Raiffeisen Invest EUR.
In September 2018 was launched Raiffeisen Vizion Fund that is the third Investment Fund from
Raiffeisen Invest. From March 2018 we offered depositary service to WVP Fund Management
Tirana which manages WVP Top Investment Fund.
From the end of 2014 Fibank Albania was licensed by Financial Supervision Authority as Custodian
of Corporate and Municipality Bonds. From January 2015 Fibank Albania offered this service to
Credins Bank for its corporate bonds and from December 2018 offered the service for the corporate
bond of Digitalb sha.
THE Annual Report FIBANK ALBANIA /2019 58

Financial Statements

for the year ended 31 December 2019


(with independent auditors’ report thereon)
THE Annual Report FIBANK ALBANIA /2019 59

TABLE OF CONTENTS
INDEPENDENT AUDITORS’REPORT
FINANCIAL STATEMENTS:

62 Statement of comprehensive income for the year ended 31 December 2019

63 Statement of financial position as at 31 December 2019

64 Statements of cash flows for the year ended 31 December 2019

65 Statement of changes in equity for the year ended 31 December 2019

67 NOTES TO THE FINANCIAL STATEMENTS


THE Annual Report FIBANK ALBANIA /2019 60

RESPONSIBILITY FOR THE ANNUAL FINANCIAL STATEMENTS


RESPONSIBILITY FOR THE ANNUAL FINANCIAL STATEMENTS

The Management of First Investment Bank - Albania sh.a. (“the Bank”) is responsible for ensuring that the
annual financial statements for the year 2019, prepared in accordance with the International Financial
Reporting Standards, give a true and fair view of the financial position, the financial performance, the
changes of equity and the cash flows of the Bank for that period.

After making enquiries, the Management reasonably expects the Bank to have adequate resources to
continue to operate in the foreseeable future. Accordingly, the Management prepared the annual financial
statements using the going concern basis of accounting.
In preparing the annual financial statements, the Management is responsible for:
• selection and consistent application of suitable accounting policies in accordance with the applicable
financial reporting standards;
» giving reasonable and prudent judgments and estimates;
• using the going concern basis of accounting, unless it is inappropriate to presume so.
The Management is responsible for keeping the proper accounting records, which at any time with
reasonable certainty present the financial position and the financial performance of the Bank, and also their
compliance with the International Financial Reporting Standards. The Management is also responsible for
safe keeping the assets of the Bank and also for taking reasonable steps for prevention and detection of
fraud and other irregularities.

First Investment Bank - Albania sh.a. Blvd. “Deshmoret e Kombit”


Twin Towers, Tower no. 2, FI. 14 Tirane, Albania
17 February 2020
THE Annual Report FIBANK ALBANIA /2019 61

INDEPENDENT
AUDITOR’S REPORT
To the Management and Shareholder of
First Investment Bank – Albania sh.a.
Statement of profit or loss and comprehensive income for the year ended 31 December 2019
in thousands ALL

Year ended Year ended


Note 31 December 2019 31 December 2018
Interest and similar income 1,193,607 1,157,472
Interest expense and similar charges (255,282) (180,994)
Net interest income 7 938,325 976,478

Fee and commission income 297,270 263,752


Fee and commission expense (51,954) (46,565)
Net fee and commission income 8 245,316 217,187

Net trading income 9 26,250 (106,151)

Other operating income 10 169,121 43,543

TOTAL INCOME FROM BANKING OPERATIONS 1,379,012 1,131,057

Net impairment losses 5c (129,295) (73,534)


Net impairment loss on off-balance sheet (325) (112)
Personnel expenses 11 (310,448) (253,281)
Operating lease expenses - (72,742)
Depreciation and amortization 21,22 (104,632) (30,094)
General administrative expenses 12 (157,592) (155,015)
Other expenses, net 13 (104,075) (63,799)
(806,367) (648,577)

PROFIT BEFORE TAX 572,645 482,480

Income tax expense 14 (90,164) (81,448)

NET PROFIT FOR THE YEAR 482,481 401,032

Other comprehensive income / (loss),


net of income tax (63,901) 191,042

TOTAL COMPREHENSIVE INCOME FOR THE


YEAR ATTRIBUTED TO THE OWNERS 418,580 592,074

The notes on pages 7 to 64 are an integral part of these financial statements.


Statement of Financial Position as at 31 December 2019
in thousands ALL

As at As at
Note 31 December 2019 31 December 2018
ASSETS
Cash and balances with Central Bank 15 736,009 514,799
Restricted balances 16 2,017,749 1,677,859
Investment in securities at FVOCI 17 9,230,939 7,540,288
Loans and advances to banks and financial institutions 18 3,279,997 2,448,132
Loans and advances to customers 19 14,669,657 11,713,074
Property and equipment 20 194,543 138,632
Intangible assets 21 32,964 25,326
Repossessed assets 22 479,443 519,189
Right of use assets 20 958,085 -
Other assets 23 123,479 55,652
TOTAL ASSETS 31,722,865 24,632,951

LIABILITIES AND SHAREHOLDERS' EQUITY


Due to banks 24 24,298 16,045
Due to customers 25 26,588,459 20,807,370
Repurchase agreements 26 - 202,770
Subordinated term debt 27 245,495 -
Lease liability 28 956,506 -
Other liabilities 29 391,629 131,268
Deferred tax liability 14 58,575 67,958
Total liabilities 28,264,962 21,225,411

Issued share capital 30 1,516,517 1,516,517


Legal reserve 59,990 39,938
Other reserve 158,590 133,235
Revaluation reserve in
investment in securities at FVOCI 371,255 436,323
Retained earnings 1,351,551 1,281,527
Shareholders‘ equity 3,457,903 3,407,540

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 31,722,865 24,632,951

The notes on pages 7 to 64 are an integral part of these financial statements.

2
Statement of Cash Flow for the year ended 31 December 2019
in thousands ALL

Year ended Year ended


Note 31 December 2019 31 December 2018
Cash flow from operating activities:
Net profit for the period 482,481 401,032
Non-cash items in the statement of comprehensive income
Net impairment credit losses 20 129,620 73,646
Depreciation and amortization 21,22 104,632 30,094
Net interest income 7 (938,325) (976,478)
Tax expense 14 90,164 81,448
(Gain) / loss from sale of tangible assets (200) 580
Loss from sale of other assets 9,403 670
(122,225) (389,008)
Changes in working capital:
(Increase) in loans to customers 19 (2,897,097) (2,193,411)
(Increase) in other assets (63,317) (40,854)
(Increase) in obligatory reserve (339,890) (217,023)
Increase / (decrease) in deposits from banks 7,458 (331,239)
Increase in amounts owed to other depositors 5,751,379 3,566,925
Increase in other liabilities 278,167 (10,089)

Interest paid (222,827) (170,352)


Interest received 1,003,747 1,104,638
Income tax paid 14 (120,260) (68,820)
NET CASH FLOWS
(USED IN) / FROM OPERATING ACTIVITIES 3,275,135 1,250,767

Cash flow from / (used in) investing activities:


Purchase of securities at FVOIC (7,578,823) (2,899,177)
Sale of securities at FVOIC 5,812,906 2,767,326
Purchase of intangible assets 21 (16,640) (10,877)
Purchase of property and equipment 20 (78,508) (80,437)
Sale of tangible and intangible fixed assets 200 1,270
Sale of other assets 39,692 9,705
NET CASH FLOWS
FROM / (USED IN) INVESTING ACTIVITIES (1,821,173) (212,190)
Statement of Cash Flow for the year ended 31 December 2019
in thousands ALL

Year ended Year ended


Note 31 December 2019 31 December 2019

Cash flow (used in) / from financing activities:


Issue of subordinated debt 27 243,540 -
(Decrease) / Increase in borrowings (202,765) (415,556)
Payment of lease liabilities 28 (74,612) -
Dividends paid to equity holders 30 (367,050) -
NET CASH FLOWS
(USED IN)/FROM FINANCING ACTIVITIES (400,887) (415,556)

NET INCREASE IN CASH AND CASH EQUIVALENTS 1,053,075 623,021

CASH AND CASH EQUIVALENTS


AT THE BEGINNING OF THE YEAR 33 2,962,931 2,339,910

CASH AND CASH EQUIVALENTS


AT THE END OF THE YEAR 33 4,016,006 2,962,931

The notes on pages 7 to 64 are an integral part of these financial statements.


Statement of Changes in Equity for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

Fair value
reserve on
Share Retained investments
Capital Reserve earnings at FVOCI Total
Balance at 1 January 2018 1,516,517 18,154 991,726 129,616 2,656,013
Adjustment on Initial
application of IFRS 9 - - 43,788 113,900 157,688

Balance at 1 January 2018 1,516,517 18,154 1,035,514 243,516 2,813,701


Total comprehensive income
for the period
Profit of the year - - 401,032 - 401,032
Other comprehensive income,
net of income tax - - - 192,807 192,807
Total comprehensive income
for the year - - 401,032 192,807 583,839

Transaction with owners,


recorded directly in equity
Contributions and
distributions
Issued share capital - - - - -
Changes in reserve
Legal reserve - 21,784 (21,784) - -
Other reserve - 133,235 (133,235) - -
Total contributions and
distributions - 155,019 (155,019) - -

Balance at 31 December 2018 1,516,517 173,173 1,281,527 436,323 3,407,540

The notes on pages 7 to 64 are an integral part of these financial statements.

5
Statement of Changes in Equity for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

Fair value
reserve on
Share Retained investments
Capitol fteserve earnings at FVOCI Total
Balance at 1 January 2019 1,516,517 173,173 1,281,527 436,323 3,407,540
Total comprehensive income
for the period
Profit of the year 482,481 482,481
Other comprehensive income,
net of income tax (65,068) (65,068)
Total comprehensive income
for the year - - 482,481 (65,068) 417,413

Transaction with owners,


recorded directly in equity
Contributions and
distributions
Issued share capital
Dividend paid (367,050) (367,050)
Changes in reserve
Legal reserve 20,052 (20,052)
Other reserve 25,355 (25,355)
Total contributions and
distributions - 45,407 (412,457) - (367,050)
Balance at 31 December 2019 1,516,517 218,580 1,351,551 371,255 3,457,903
The notes on pages 7 to 64 are an integral part of these financial statements.

6
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

1. General
First Investment Bank Albania (the Bank) incorporated in the Republic of Albania is a joint stock
company established on 1 August 2005 and has its registered office in Tirana, "Dëshmorët e Kombit"
Blvd., Twin Towers, Tower 2 Floor 14.
The Bank has a general banking license issued by the Bank of Albania (hereinafter “BoA"), on 6 July
2007, according to which it is allowed to conduct all banking transactions permitted by the Albanian
legislation. The Bank is primarily involved in corporate and retail banking.
The Bank has also been licensed by Albanian Financial Supervisory Authority for carrying out
depositary, custodian and brokerage services.
The Bank is a subsidiary of First Investment Bank A.D. (hereinafter the “Parent”), an entity
incorporated in Bulgaria as a financial institution which owns 100% of the Bank shares. Previously it
operated as a foreign branch of the Parent in Albania since February 1999.
The shareholders structure of the parent as at 31 December 2019 was as follows:
% of issued
Shareholders
share capital
Mr. Ivailo Dimitrov Mutafchiev 42.50
Mr. Tzeko Todorov Minev 42.50
Other shareholders (shareholders holding shares subject to free trade
on Bulgarian Stock Exchange - Sofia) 15.00

Total 100.00
The headquarters of First Investment Bank – ALBANIA sh.a. is located in Tirana. The network of
branches includes 14 branches. Four branches are located in Tirana (Tirana 1, Tirana 2, Tirana 3 and
Twin Towers) and other branches are located in Berat, Durrës, Elbasan, Fier, Korçë, Lezhë, Lushnjë,
Sarandë, Shkodër and Vlorë.
The Bank had 218 employees as at 31 December 2019 (31 December 2018: 183). The average number
of employees of the bank for the year ended 31 December 2019 is 206 (31 December 2018: 166).

2. Basis of preparation
a) Statement of compliance
The financial statements have been prepared in accordance with International Financial Reporting
Standards (IFRS).

b) Basis of measurement
The financial statements have been prepared on the historical cost basis except for financial assets
at FVOCI which have been measured at fair value.

7
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

2. Basis of preparation (continued)


c) Functional and presentation currency
The financial statements are presented in Albanian Lekë (ALL) rounded to the nearest thousand,
which is the Bank’s functional currency.
Management chose ALL as the functional currency due to the fact that the Bank operates in an
environment whose prices, in the judgment of Management, are driven by the domestic currency
ALL. Costs and contracts are driven by ALL, even if their formal denomination is in different
currencies.

d) Use of estimated and judgments


The preparation of the financial statements in conformity with IFRSs requires management to make
judgments, estimates and assumptions that affect the application of accounting policies and the
reported amounts of assets, liabilities, income and expenses. Actual results may differ from these
estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognized in the period in which the estimate is revised and in any future periods
affected.
A. Judgments
Information about judgments made in applying accounting policies that have the most significant
effects on the amounts recognized in the financial statements is included in the following notes.
- Note 4 (f) (ii): classification of financial assets: assessment of the business model within which the
assets are held and assessment of whether the contractual terms of the financial asset are SPPI on
the principal amount outstanding.
- Note 5 (c): establishing the criteria for determining whether credit risk on the financial asset has
increased significantly since initial recognition, determining methodology for incorporating forward-
looking information into measurement of ECL and selection and approval of models used to measure
ECL.
B. Assumptions and estimation uncertainties
Information about assumptions and estimation uncertainties that have a significant risk of resulting
in a material adjustment in the year ended 31 December 2019 is included in the following notes.
- Note 5 (c): impairment of financial instruments: determining inputs into the ECL impairment model,
including incorporation of forward-looking information
- Note 4 (f) (vii): determination of the fair value of financial instruments with significant unobservable
inputs
- Note 4 (e) (ii): recognition of deferred tax assets
- Note 4(o): recognition and measurement of contingencies: key assumption about the likelihood and
magnitude of an outflow of resources
- Note 4 (l): net realizable value of inventory: fair value measurement with significant unobservable
inputs
- Note 4 (g) (viii): impairment of financial instruments: key assumptions used in estimating
recoverable cash flows

8
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

3. Changes in accounting policy


The Bank has adopted the new accounting pronouncements which have become effective this year,
and are as follows:

IFRS 16 ‘Leases’
IFRS 16 ‘Leases’ replaces IAS 17 ‘Leases’ along with three Interpretations (IFRIC 4 ‘Determining
whether an Arrangement contains a Lease’, SIC 15 ‘Operating Leases-Incentives’ and SIC 27
‘Evaluating the Substance of Transactions Involving the Legal Form of a Lease’).
The adoption of this new Standard has resulted in the Bank recognising a right-of-use asset and
related lease liability in connection with all former operating leases except for those identified as
low-value or having a remaining lease term of less than 12 months from the date of initial application.
The Bank has elected not to include initial direct costs in the measurement of the right-of-use asset
for operating leases in existence at the date of initial application of IFRS 16, being 1 January 2019.
At this date, the Bank has also elected to measure the right-of-use assets at an amount equal to the
lease liability adjusted for any prepaid or accrued lease payments that existed at the date of
transition.
The following is a reconciliation of the financial statement line items from IAS 17 to IFRS 16 at 1
January 2019:
As at As at
Item 31 December Reclassification Remeasurement 1 January 2019

Right of use asset - - 941,546 941,546


Lease liabilities - - (941,546) (941,546)
Deferred gain on sale
& leaseback (current) - - - -
Deferred gain on sale &
leaseback (non current) - - - -
Total - - - -

The following is a reconciliation of total operating lease commitments at 31 December 2018 to the
lease liabilities recognised at 1 January 2019:
As at
1 January 2019
Total operating lease commitments disclosed at 31 December 2018 610,610
Discounted using incremental borrowing rate (61,692)
Operating lease liabilities 548,918
Reasonably certain extension options 392,628
Finance lease obligations -
Total lease liabilities recognized under IFRS 16 941,546

9
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

4. Significant accounting policies


a) Foreign currency transactions
Transactions in foreign currencies are translated into the functional currency using the exchange rate
prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign
currency at the reporting date are retranslated to the functional currency at the exchange rate at
that date. The foreign currency gain or loss on monetary items is the difference between amortised
cost in the functional currency at the beginning of the year, adjusted for effective interest and
payments during the year, and the amortised costs in foreign currency translated at the exchange
rate at the end of the year.
Non-monetary assets and liabilities that are measured at fair value in a foreign currency are
translated to the functional currency at the exchange rate at the date that the fair value was
determined. Non-monetary items that are measured based on historical cost in a foreign currency
are translated using the exchange rate at the date of the transaction. Foreign currency differences
arising on retranslation are generally recognised in profit or loss.

b) Interest
Effective Interest rate
Interest income and expense are recognised in profit or loss using the effective interest method. The
‘effective interest rate’ is the rate that exactly discounts estimated future cash payments or receipts
through the expected life of the financial instrument to
- The gross carrying amount of the financial asset; or
- The amortised cost of the financial liability
When calculating the effective interest rate for financial instruments other than purchased or
originated credit-impaired assets, the Bank estimates future cash flows considering all contractual
terms of the financial instrument, but not ECL. For purchased or originated credit-impaired financial
assets, a credit adjusted effective interest rate is calculated using estimated future cash flows
including ECL.
The calculation of the effective interest rate includes transaction costs and fees and points paid or
received that are an integral part of the effective interest rate. Transaction costs include incremental
costs that are directly attributable to the acquisition or issue of a financial asset or financial liability.
Amortised cost and gross carrying amount
The ‘amortised cost’ of a financial asset or financial liability is the amount at which the financial
asset or financial liability is measured on initial recognition minus the principal repayments, plus or
minus the cumulative amortisation using the effective interest method of any difference between
that initial amount and the maturity amount and, for financial assets, adjusted for any expected
credit loss allowance (or impairment allowance before 1 January 2018). The ‘gross carrying amount
of a financial asset’ is the amortised cost of a financial asset before adjusting for any expected credit
loss allowance.

10
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

4. Significant accounting policies (continued)


b) Interest (continued)
Calculation of interest income and expense
The effective interest rate of a financial asset or financial liability is calculated on initial recognition
of a financial asset or a financial liability. In calculating interest income and expense, the effective
interest rate is applied to the gross carrying amount of the asset (when the asset is not credit-
impaired) or to the amortised cost of the liability. The effective interest rate is revised as a result of
periodic re-estimation of cash flows of floating rate instruments to reflect movements in market
rates of interest.
However, for financial assets that have become credit-impaired subsequent to initial recognition,
interest income is calculated by applying the effective interest rate to the amortised cost of the
financial asset. If the asset is no longer credit-impaired, then the calculation of interest income
reverts to the gross basis.
For financial assets that were credit-impaired on initial recognition, interest income is calculated by
applying the credit-adjusted effective interest rate to the amortised cost of the asset. The calculation
of interest income does not revert to a gross basis, even if the credit risk of the asset improves.
For information on when financial assets are credit-impaired, see Note 4(g)(viii).

c) Fees and commission


Fee and commission income and expenses that are integral to the effective interest rate on a financial
asset or liabilities are included in the measurement of the effective interest rate.
Other fee and commission income, including account servicing fees, investment management fees,
sales commission and placement fees are recognized as the related services are performed. If a loan
commitment is not expected to result in a draw-down of a loan, then the related loan commitment
fees are recognized on a straight line basis over the commitment period.
A contract with a customer that results in a recognised financial instrument in the Bank’s financial
statements may be partially in the scope of IFRS 9 and partially in the scope of IFRS 15. If this is the
case, then the Bank first applies IFRS 9 to separate and measure the part of the contract that is in
the scope of IFRS 9 and then applies IFRS 15 to the residual.
Other fees and commission income and expenses arise on financial services operated by the Bank and
are recognized when the corresponding service is provided or received.

d) Net trading income


Net trading income comprises gains less losses related to realized and unrealized foreign exchange
differences.

11
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

4. Significant accounting policies (continued)


e) Tax expense
Tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in
profit or loss except to the extent that they relate to items recognised directly in equity or in other
comprehensive income.
(i) Current tax
Current tax is the expected tax payable or receivable on the taxable income or loss for the year,
using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax
payable in respect of previous years.
(ii) Deferred tax
Deferred tax is recognised in respect of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.
Deferred tax is not recognised for temporary differences on the initial recognition of assets or
liabilities in a transaction that is not a business combination and that affects neither accounting nor
taxable profit nor loss.
The measurement of deferred tax reflects the tax consequences that would follow the manner in
which the Bank expects, at the end of the reporting period, to recover or settle the carrying amount
of its assets and liabilities.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences
when they reverse, using tax rates enacted or substantively enacted at the reporting date.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current
tax liabilities and assets, and they relate to taxes levied by the same tax authority on the same
taxable entity.
A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary
differences to the extent that it is probable that future taxable profits will be available against which
it can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the
extent that it is no longer probable that the related tax benefit will be realised.
(iii) Tax exposures
In determining the amount of current and deferred tax, the Bank takes into account the impact of
uncertain tax positions and whether additional taxes and interest may be due. This assessment relies
on estimates and assumptions and may involve a series of judgments about future events. New
information may become available that causes the Bank to change its judgment regarding the
adequacy of existing tax liabilities; such changes to tax liabilities will impact tax expense in the
period that such a determination is made.

12
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

4. Significant accounting policies (continued)


f) Financial assets and financial liabilities
(i) Recognition
The Bank initially recognises loans and advances, deposits, debt securities issued and subordinated
liabilities on the date at which they are originated. Regular way purchases and sales of financial
assets are recognised on the trade date at which the Bank commits to purchase or sell the asset. All
other financial assets and liabilities are initially recognised on the trade date at which the Bank
becomes a party to the contractual provisions of the instrument.
A financial asset or financial liability is initially measured at fair value plus transaction costs that are
directly attributable to its acquisition or issue.
(ii) Classification
On initial recognition, the Bank classified a financial asset as measured at amortised cost, FVOCI or
FVTPL.
A financial asset is measured at amortised cost if it meets both of the following conditions and is not
designated as at FVTPL:
- the asset is held within a business model whose objective is to hold assets to collect contractual
cash flows;
- the contractual terms of the financial asset give rise on specified dates to cash flows that are SPPI.
A debt instrument is measured at FVOCI only if it meets both of the following conditions and is not
designated as at FVTPL:
– the asset is held within a business model whose objective is achieved by both collecting contractual
cash flows and selling financial assets;
- the contractual terms of the financial asset give rise on specified dates to cash flows that are SPPI.
On initial recognition of an equity investment that is not held for trading, the Bank may irrevocably
elect to present subsequent changes in fair value in OCI. This election is made on an investment by-
investment basis.
All other financial assets are classified as measured at FVTPL.
In addition, on initial recognition, the Bank may irrevocably designate a financial asset that otherwise
meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so
eliminates or significantly reduces an accounting mismatch that would otherwise arise.

13
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

4. Significant accounting policies (continued)


f) Financial assets and financial liabilities (continued)
(ii) Classification (continued)
Business model assessment
The Bank makes an assessment of the objective of a business model in which an asset is held at a
portfolio level because this best reflects the way the business is managed and information is provided
to management. The information considered includes:
-the stated policies and objectives for the portfolio and the operation of those policies in practice.
In particular, whether management’s strategy focuses on earning contractual interest revenue,
maintaining a particular interest rate profile, matching the duration of the financial assets to the
duration of the liabilities that are funding those assets or realising cash flows through the sale of the
assets;
- how the performance of the portfolio is evaluated and reported to the Bank’s management;
- the risks that affect the performance of the business model (and the financial assets held within
that business model) and its strategy for how those risks are managed;
- how managers of the business are compensated (e.g. whether compensation is based on the fair
value of the assets managed or the contractual cash flows collected);
- the frequency, volume and timing of sales in prior periods, the reasons for such sales and its
expectations about future sales activity. However, information about sales activity is not considered
in isolation, but as part of an overall assessment of how the Bank stated objective for managing the
financial assets is achieved and how cash flows are realised.
Financial assets that are held for trading or managed and whose performance is evaluated on a fair
value basis are measured at FVTPL because they are neither held to collect contractual cash flows
nor held both to collect contractual cash flows and to sell financial assets.
Assessment of whether contractual cash flows are solely payments of principal and interest.
For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on
initial recognition. ‘Interest’ is defined as consideration for the time value of money and for the
credit risk associated with the principal amount outstanding during a particular period of time and
for other basic lending risks and costs, as well as profit margin.
In assessing whether the contractual cash flows are SPPI, the Bank considers the contractual terms
of the instrument. This includes assessing whether the financial asset contains a contractual term
that could change the timing or amount of contractual cash flows such that it would not meet this
condition. In making the assessment, the Bank considers:
– contingent events that would change the amount and timing of cash flows;- leverage features; -
prepayment and extension terms;
- terms that limit the Bank’s claim to cash flows from specified assets (e.g. non-recourse loans);
- and features that modify consideration of the time value of money (e.g. periodical reset of interest
rates).

14
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

4. Significant accounting policies (continued)


f) Financial assets and financial liabilities (continued)
(ii) Classification (continued)
Reclassifications
Financial assets are not reclassified subsequent to their initial recognition, except in the period after
the Bank changes its business model for managing financial assets.
Financial Liabilities
The Bank classifies its financial liabilities, other than financial guarantees and loan commitments, as
measured at amortized cost or fair value through profit or loss. See accounting policy 4.o.
(iii) Derecognition
Financial Assets
The Bank derecognises a financial asset when the contractual rights to the cash flows from the
financial asset expire, or when it transfers the rights to receive the contractual cash flows on the
financial asset in a transaction in which substantially all the risks and rewards of ownership of the
financial asset are transferred. Any interest in transferred financial assets that is created or retained
by the Bank is recognised as a separate asset or liability.
The Bank enters into transactions whereby it transfers assets recognised on its statement of financial
position, but retains either all or substantially all of the risks and rewards of the transferred assets
or a portion of them. If all or substantially all risks and rewards are retained, then the transferred
assets are not derecognised. Transfers of assets with retention of all or substantially all risks and
rewards include, for example, securities lending and repurchase transactions. In transactions in which
the Bank neither retains nor transfers substantially all the risks and rewards of ownership of a
financial asset, it derecognises the asset if it does not retain control over the asset. The rights and
obligations retained in the transfer are recognised separately as assets and liabilities as appropriate.
In transfers in whom control over the asset is retained, the Bank continues to recognise the asset to
the extent of its continuing involvement, determined by the extent to which it is exposed to changes
in the value of the transferred asset.
In certain transactions the Bank retains the obligation to service the transferred financial asset for a
fee. The transferred asset is derecognised in its entirety if it meets the derecognising criteria. An
asset or liability is recognised for the servicing contract, depending on whether the servicing fee is
more than adequate (asset) or is less than adequate (liability) for performing the servicing. The Bank
writes off certain loans when they are determined to be uncollectible (see note 4.g.viii).
Financial Liabilities
The Bank derecognises a financial liability when its contractual obligations are discharged or
cancelled or expire.

15
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

4. Significant accounting policies (continued)


f) Financial assets and financial liabilities (continued)
(iv) Modification of financial assets and financial liabilities
Financial assets
If the terms of a financial asset are modified, then the Bank evaluates whether the cash flows of the
modified asset are substantially different.
If the cash flows are substantially different, then the contractual rights to cash flows from the original
financial asset are deemed to have expired. In this case, the original financial asset is derecognised
(see iii) and a new financial asset is recognised at fair value plus any eligible transaction costs. Any
fees received as part of the modification are accounted for as follows:
– fees that are considered in determining the fair value of the new asset and fees that represent
reimbursement of eligible transaction costs are included in the initial measurement of the asset; and
– other fees are included in profit or loss as part of the gain or loss on derecognition.
If cash flows are modified when the borrower is in financial difficulties, then the objective of the
modification is usually to maximise recovery of the original contractual terms rather than to originate
a new asset with substantially different terms. If the Bank plans to modify a financial asset in a way
that would result in forgiveness of cash flows, then it first considers whether a portion of the asset
should be written off before the modification takes place (see below for write-off policy). This
approach impacts the result of the quantitative evaluation and means that the derecognition criteria
are not usually met in such cases.
If the modification of a financial asset measured at amortised cost or FVOCI does not result in
derecognition of the financial asset, then the Bank first recalculates the gross carrying amount of the
financial asset using the original effective interest rate of the asset and recognises the resulting
adjustment as a modification gain or loss in profit or loss. For floating-rate financial assets, the
original effective interest rate used to calculate the modification gain or loss is adjusted to reflect
current market terms at the time of the modification.
Any costs or fees incurred and fees received as part of the modification adjust the gross carrying
amount of the modified financial asset and are amortised over the remaining term of the modified
financial asset.
If such a modification is carried out because of financial difficulties of the borrower (see 4.g.(viii)),
then the gain or loss is presented together with impairment losses. In other cases, it is presented as
interest income calculated using the effective interest rate method (see 3 (b)).

16
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

4. Significant accounting policies (continued)


f) Financial assets and financial liabilities (continued)
(iv) Modification of financial assets and financial liabilities (continued)
Financial liabilities
The Bank derecognises a financial liability when its terms are modified and the cash flows of the
modified liability are substantially different. In this case, a new financial liability based on the
modified terms is recognised at fair value. The difference between the carrying amount of the
financial liability derecognised and consideration paid is recognised in profit or loss. Consideration
paid includes nonfinancial assets transferred, if any, and the assumption of liabilities, including the
new modified financial liability.
If the modification of a financial liability is not accounted for as derecognition, then the amortised
cost of the liability is recalculated by discounting the modified cash flows at the original effective
interest rate and the resulting gain or loss is recognised in profit or loss. For floating-rate financial
liabilities, the original effective interest rate used to calculate the modification gain or loss is
adjusted to reflect current market terms at the time of the modification. Any costs and fees incurred
are recognised as an adjustment to the carrying amount of the liability and amortised over the
remaining term of the modified financial liability by re-computing the effective interest rate on the
instrument.
(v) Offsetting
Financial assets and liabilities are set off and the net amount presented in the statement of financial
position when, and only when, the Bank has a legal right to set off the amounts and intends either
to settle on a net basis or to realise the asset and settle the liability simultaneously. Income and
expenses are presented on a net basis only when permitted by the accounting standards, or for gains
and losses arising from a group of similar transactions such as in the Bank’s trading activity.
(vi) Amortized cost measurement
The amortised cost of a financial asset or liability is the amount at which the financial asset or liability
is measured at initial recognition, minus principal repayments, plus or minus the cumulative
amortisation using the effective interest method of any difference between the initial amount
recognised and the maturity amount, minus any reduction for impairment.
(vii) Fair Value Measurement
Fair value is the amount for which an asset could be exchanged, or a liability settled, between
knowledgeable, willing parties in an arm's length transaction on the measurement date.
When available, the Bank measures the fair value of an instrument using quoted prices in an active
market for that instrument. A market is regarded as active if quoted prices are readily and regularly
available and represent actual and regularly occurring market transactions on an arm's length basis.

17
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

4. Significant accounting policies (continued)


f) Financial assets and financial liabilities (continued)
(vii) Fair Value Measurement (continued)
If a market for a financial instrument is not active, the Bank establishes fair value using a valuation
technique. Valuation techniques include using recent arm's length transactions between
knowledgeable, willing parties (if available), reference to the current fair value of other instruments
that are substantially the same, discounted cash flow analyses and option pricing models. The chosen
valuation technique makes maximum use of market inputs, relies as little as possible on estimates
specific to the Bank, incorporates all factors that market participants would consider in setting a
price, and is consistent with accepted economic methodologies for pricing financial instruments.
Inputs to valuation techniques reasonably represent market expectations and measures of the risk-
return factors inherent in the financial instrument. The Bank calibrates valuation techniques and
tests them for validity using prices from observable current market transactions in the same
instrument or based on other available observable market data.
The best evidence of the fair value of a financial instrument at initial recognition is the transaction
price, i.e., the fair value of the consideration given or received, unless the fair value of that
instrument is evidenced by comparison with other observable current market transactions in the same
instrument (i.e., without modification or repackaging) or based on a valuation technique whose
variables include only data from observable markets. When transaction price provides the best
evidence of fair value at initial recognition, the financial instrument is initially measured at the
transaction price and any difference between this price and the value initially obtained from a
valuation model is subsequently recognised in profit or loss on an appropriate basis over the life of
the instrument but not later than when the valuation is supported wholly by observable market data
or the transaction is closed out.
Assets and long positions are measured at a bid price; liabilities and short positions are measured at
an asking price. Where the Bank has positions with offsetting risks, mid-market prices are used to
measure the offsetting risk positions and a bid or asking price adjustment is applied only to the net
open position as appropriate. Fair values reflect the credit risk of the instrument and include
adjustments to take account of the credit risk of the Bank and the counterparty where appropriate.
Fair value estimates obtained from models are adjusted for any other factors, such as liquidity risk
or model uncertainties, to the extent that the Bank believes a third-party market participant would
take them into account in pricing a transaction.

18
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

4. Significant accounting policies (continued)


f) Financial assets and financial liabilities (continued)
(viii) Impairment
The Bank recognises loss allowances for ECL on the following financial instruments that are not
measured at FVTPL:
- financial assets that are debt instruments;
- financial guarantee contracts issued; and
- loan commitments issued.
The Bank measures loss allowances at an amount equal to lifetime ECL, except for the following, for
which they are measured as 12-month ECL:
- debt investment securities that are determined to have low credit risk at the reporting date; and
- other financial instruments on which credit risk has not increased significantly since their initial
recognition.
The Bank considers a debt investment security to have low credit risk when its credit risk rating is
equivalent to the globally understood definition of ‘investment grade’. The Bank does not apply the
low credit risk exemption to any other financial instruments.
12-month ECL are the portion of ECL that result from default events on a financial instrument that
are possible within the 12 months after the reporting date. Financial instruments for which a 12-
month ECL is recognised are referred to as ‘Stage 1 financial instruments’.
Life-time ECL are the ECL that result from all possible default events over the expected life of the
financial instrument. Financial instruments for which a lifetime ECL is recognised but which are not
credit-impaired are referred to as ‘Stage 2 financial instruments’.
Measurement of ECL
ECL are a probability-weighted estimate of credit losses. They are measured as follows:
- financial assets that are not credit-impaired at the reporting date: as the present value of all cash
shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the
contract and the cash flows that the Bank expects to receive);
- financial assets that are credit-impaired at the reporting date: as the difference between the gross
carrying amount and the present value of estimated future cash flows;
- undrawn loan commitments: as the present value of the difference between the contractual cash
flows that are due to the Bank if the commitment is drawn down and the cash flows that the Bank
expects to receive; and
- financial guarantee contracts: the expected payments to reimburse the holder less any amounts
that the Bank expects to recover.

19
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

4. Significant accounting policies (continued)


f) Financial assets and financial liabilities (continued)
(viii) Impairment (continued)
Credit-impaired financial assets
At each reporting date, the Bank assesses whether financial assets carried at amortised cost and debt
financial assets carried at FVOCI are credit-impaired. A financial asset is ‘credit-impaired’ when one
or more events that have a detrimental impact on the estimated future cash flows of the financial
asset have occurred.
Evidence that a financial asset is credit-impaired includes the following observable data:
- significant financial difficulty of the borrower or issuer;
- a breach of contract such as a default or past due event;
- the restructuring of a loan or advance by the Bank on terms that the Bank would not consider
otherwise;
- it is becoming probable that the borrower will enter bankruptcy or other financial reorganisation;
or
- the disappearance of an active market for a security because of financial difficulties.
A loan that has been renegotiated due to a deterioration in the borrower’s condition is usually
considered to be credit-impaired unless there is evidence that the risk of not receiving contractual
cash flows has reduced significantly and there are no other indicators of impairment. In making an
assessment of whether an investment in sovereign debt is credit-impaired, the Bank considers the
following factors.
- The market’s assessment of creditworthiness as reflected in the bond yields.
- The rating agencies’ assessments of creditworthiness.
- The country’s ability to access the capital markets for new debt issuance.
- The probability of debt being restructured, resulting in holders suffering losses through voluntary
or mandatory debt forgiveness.
- The international support mechanisms in place to provide the necessary support as ‘lender of last
resort’ to that country, as well as the intention, reflected in public statements, of governments and
agencies to use those mechanisms. This includes an assessment of the depth of those mechanisms
and, irrespective of the political intent, whether there is the capacity to fulfil the required criteria.

20
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

4. Significant accounting policies (continued)


f) Financial assets and financial liabilities (continued)
(viii) Impairment (continued)
Credit-impaired financial assets (continued)
Presentation of allowance for ECL in the statement of financial position
Loss allowances for ECL are presented in the statement of financial position as follows:
- financial assets measured at amortised cost: as a deduction from the gross carrying amount of the
assets;
- loan commitments and financial guarantee contracts: generally, as a provision;
- where a financial instrument includes both a drawn and an undrawn component, and the Bank
cannot identify the ECL on the loan commitment component separately from those on the drawn
component: the Bank presents a combined loss allowance for both components. The combined
amount is presented as a deduction from the gross carrying amount of the drawn component. Any
excess of the loss allowance over the gross amount of the drawn component is presented as a
provision; and
- debt instruments measured at FVOCI: no loss allowance is recognised in the statement of financial
position because the carrying amount of these assets is their fair value. However, the loss allowance
is disclosed and is recognised in the fair value reserve.
Write-off
Loans and debt securities are written off (either partially or in full) when there is no reasonable
expectation of recovering a financial asset in its entirety or a portion thereof. This is generally the
case when the Bank determines that the borrower does not have assets or sources of income that
could generate sufficient cash flows to repay the amounts subject to the write-off. This assessment
is carried out at the individual asset level. Recoveries of amounts previously written off are included
in ‘impairment losses on financial instruments’ in the statement of profit or loss and OCI.
Financial assets that are written off could still be subject to enforcement activities in order to comply
with the Bank’s procedures for recovery of amounts due.

g) Cash and cash equivalents


Cash and cash equivalents comprise cash balances on hand, cash deposited with central banks and
short-term highly liquid investments with original maturity of three months or less.

h) Loans and advances to customers


Loans and advances captions in the statement of financial position include loans and advances
measured at amortised cost. They are initially measured at fair value plus incremental direct
transaction costs, and subsequently at their amortised cost using the effective interest method.
When the Bank purchases a financial asset and simultaneously enters into an agreement to resell the
asset (or a substantially similar asset) at a fixed price on a future date (reverse repo or stock
borrowing), the arrangement is accounted for as a loan or advance, and the underlying asset is not
recognised in the Bank’s financial statements.

21
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

4. Significant accounting policies (continued)


i) Investment Securities
The “investment securities” caption in the statement of financial position includes
- debt investment securities measured at amortised cost (see g (ii)); these are initially measured at
fair value plus incremental direct transaction costs, and subsequently at their amortised cost using
the effective interest method;
- debt securities measured at FVOCI;
For debt securities measured at FVOCI, gains and losses are recognised in OCI, except for the
following, which are recognised in profit or loss in the same manner as for financial assets measured
at amortised cost:
- Interest revenue using the effective interest method
- ECL and reversals, and
- Foreign exchange gains and losses
When debt security measured at FVOCI is derecognised, the cumulative gain or loss previously
recognised in OCI is reclassified from equity to profit or loss.

j) Property and equipment


Items of property and equipment are measured at their acquisition cost less accumulated
depreciation and accumulated impairment losses. Useful life is estimated based on Management
expectations on the serviceability of assets.
Depreciation is calculated on a straight line basis at prescribed rates designed to decrease the cost
or valuation of fixed assets over the expected useful lives of each part of an item of property and
equipment. The following are the useful lives:

Leasehold improvements 5-20 years


Fittings, fixtures and installations 10 years
Motor vehicles 10 years
Machinery and electronic equipment 10 years
Computer and IT system equipment 5 years
Other office equipment 10 years
Assets are not depreciated until they are brought into use and transferred from assets in the course
of construction into the relevant asset category.

k) Intangible assets
Intangible assets are stated at cost less accumulated amortization and any impairment losses.
Amortization is calculated on a straight-line basis over the expected useful life of the asset. The
following are the useful lives:

Patents, copyrights and trademarks 5 years


Software & other intangible assets 5 years

22
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

4. Significant accounting policies (continued)


l) Repossessed assets
Repossessed assets acquired through enforcement of security over non-performing loan and advances
to customer that are not held for sale, do not earn rental, not own used and are intended for disposal
in a reasonably short period of time, without significant restructuring, are classified as inventory.
Repossessed assets are measured at the lower of cost and net realizable value and any write down is
recognized in the profit or loss. Any gain or loss on disposal is recognized in profit or loss.

m) Impairment of non-financial assets


The carrying amounts of the Bank’s non-financial assets, other than deferred tax assets, are reviewed
at each reporting date to determine whether there is any indication of impairment. If any such
indication exists then the asset’s recoverable amount is estimated.
An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds
its recoverable amount. A cash-generating unit is the smallest identifiable asset group that generates
cash flows that largely are independent from other assets and groups. Impairment losses are
recognised in profit or loss. Impairment losses recognised in respect of cash-generating units are
allocated first to reduce the carrying amount of any goodwill allocated to the units and then to
reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its
fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that reflects current market assessments of the
time value of money and the risks specific to the asset.

n) Deposits
Deposits are the Bank's main sources of debt funding.
When the Bank sells a financial asset and simultaneously enters into an agreement to repurchase the
asset (or a similar asset) at a fixed price on a future date ("repo" or "stock lending"), the arrangement
is accounted for as a deposit, and the underlying asset continues to be recognised in the Bank's
financial statements.
The Bank classifies capital instruments as financial liabilities or equity instruments in accordance
with the substance of the contractual terms of the instruments. Deposits and subordinated liabilities
are initially measured at fair value plus incremental direct transaction costs, and subsequently
measured at their amortised cost using the effective interest method, except where the Bank chooses
to carry the liabilities at fair value through profit or loss.

o) Provisions
A provision is recognized if the Bank has a legal or constructive obligation as a result of a past event,
and it is probable that an outflow of economic benefits will be required to settle the obligation.
Provisions are determined by discounting the expected future cash flows at a pre-tax rate that
reflects current market assessments of the time value of money and, where appropriate, the risks
specific to the liability.

23
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

4. Significant accounting policies (continued)


p) New standards, interpretations and amendments not yet effective
At the date of authorisation of these financial statements, several new, but not yet effective,
Standards and amendments to existing Standards, and Interpretations have been published by the
IASB. None of these Standards or amendments to existing Standards have been adopted early by the
Bank.
Management anticipates that all relevant pronouncements will be adopted for the first period
beginning on or after the effective date of the pronouncement. New Standards, amendments and
Interpretations not adopted in the current year have not been disclosed as they are not expected to
have a material impact on the Group’s financial statements.

24
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

5. Risk Management Disclosures


Below is a discussion of the various risks the Bank is exposed to as a result of its non-trading activities
and the approach taken to manage those risks.
a) Liquidity risk
Liquidity risk arises in the general funding of the Bank’s activities and in the management of positions.
It includes both the risk of being unable to fund assets at appropriate maturity and rates and the risk
of being unable to liquidate an asset at a reasonable price and in an appropriate time frame to meet
the liability obligations.
Funds are raised using a broad range of instruments including deposits and share capital. This
enhances funding flexibility, limits dependence on any one source of funds and generally lowers the
cost of funds. The Bank makes its best efforts to maintain a balance between continuity of funding
and flexibility through the use of liabilities with a range of maturity. The Bank continually assesses
liquidity risk by identifying and monitoring changes in funding required meeting business goals and
targets set in terms of the overall Bank strategy. As at 31 December 2019, the thirty largest non-
financial institution depositors represent 15.83% (2018: 11.74%) of total deposits from other
customers. The following table provides an analysis of the financial assets and liabilities of the Bank
into relevant maturity groupings based on the remaining periods to repayment.

25
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

5. Risk Management Disclosures (continued)


a) Liquidity risk (continued)
Maturity table as at 31 December 2019
Between Between
Payable Less 1 month 3 months More Maturity
on than and and than not
demand 1 month 3 months 1 year 1 year defined Total
Financial Assets
Cash and balances with Central Bank 736,009 - - - - - 736,009
Restricted balances - - - - - 2,017,749 2,017,749
Investment in securities at FVOCI - 108,889 93,107 1,860,802 7,168,140 - 9,230,939
Loans and advances to banks and
financial institutions 1,636,236 1,643,761 - - - - 3,279,997
Loans and advances to customers - 457,186 241,097 1,279,438 12,691,936 - 14,669,657
Total 736,009 3,846,072 334,204 3,140,240 19,860,076 2,017,749 29,934,351
Financial Liabilities
Due to banks 24,298 - - - - - 24,298
Due to customers 10,414,484 2,518,619 1,243,380 4,937,713 7,474,264 - 26,588,459
Repurchase Agreements - - - - - -
Subordinated term debt - - - - 245,495 - 245,495
Lease liabilities - 5,293 10,595 46,228 894,390 - 956,506
Other liabilities - - - - - 245,864 245,864
Total 10,438,782 2,548,210 1,253,975 4,983,941 8,614,148 245,864 28,060,622

Net liquidity gap (9,702,773) 1,322,160 (919,771) (1,843,700) 11,245,928 1,771,885 1,873,729

26
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

5. Risk Management Disclosures (continued)


a) Liquidity risk (continued)
Maturity table as at 31 December 2018
Payable Less Between Between More Maturity
on than 1 and 3 and than not
demand 1 month 3 months 1 year 1 year defined Total
Financial Assets
Cash and balances with Central Bank 514,799 - - - - - 514,799
Restricted balances - - - - - 1,677,859 1,677,859
Investment in securities at FVOCI - 14,288 534,918 1,616,961 5,374,121 - 7,540,288
Loans and advances to banks and
financial institutions 1,213,881 1,234,251 - - - - 2,448,132
Loans and advances to customers - 461,185 154,510 1,709,221 9,388,158 - 11,713,074
Total 1,728,680 1,709,724 689,428 3,326,182 14,762,279 1,677,859 23,894,152
Financial Liabilities
Due to banks 16,045 16,045 - - - - 16,045
Due to customers 7,515,333 1,309,720 623,254 5,899,614 5,459,449 - 20,807,370
Repurchase Agreements - 202,770 - - - - 202,770
Other liabilities - - - - - 73,279 73,279
Total 7,531,378 1,512,490 623,254 5,899,614 5,459,449 73,279 21,099,464

Net liquidity gap (5,802,698) 197,234 66,174 (2,573,432) 9,302,830 1,604,580 2,794,688

The Bank expects cash flows on certain financial assets and financial liabilities to vary significantly from the remaining contractual cash flows presented
above. The principal differences are as follows:
- 70% of the restricted balances with central bank for deposits in ALL is available for the Bank’s day-to-day operations and otherwise used for any Bank
liquidity needs.
- Investment in securities at FVOCI have a remaining contractual maturity from 1 month to 10 years but management may not keep those until final
maturity.
- A large portion of saving and current accounts due from customers are reinvested of rolled over despite being in the category “less than 1 month”.

27
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

5. Risk Management Disclosures (continued)


b) Market risk
Interest rate risk
The Bank evaluates the Interest rate risk as the risk that its interest rate gap from interest bearing
assets and liabilities might vary due to unexpected changes of core interest rates in the market. The
Bank’s operations are subject to the risk of interest rate fluctuations to the extent that interest-
earning assets and interest-bearing liabilities mature or reprise at different times or in differing
amounts. In the case of floating rate assets and liabilities the Bank is also exposed to basis risk, which
is the difference in reprising characteristics of the various floating rate indices, such as the Bank of
Albania repo rate, the LIBOR and EURIBOR. In addition, the actual effect will depend on a number of
other factors, including the extent to which repayments are made earlier or later than the contracted
dates and variations in interest rate sensitivity within reprising periods and among currencies.
In order to quantify the interest rate risk of its non-trading activities, the Bank measures the impact
of a change in the market rates on net interest income.
The interest rate risk on the Bank’s net interest income one year forward following a change of
+100bp/-100bp as at 31 December 2019 is ALL +22.5/-22.5 Million (2018: ALL +5.96/-5.96 Million). An
analysis of the Bank’s sensitivity to an increase or decrease in market interest rates (assuming no
asymmetrical movement in yield curves and a constant statement of financial position) is shown in
the following table where the effective interest rates as indicated at 31 December 2019 and the
periods in which financial liabilities and assets reprise.

28
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

5. Risk Management Disclosures (continued)


b) Market risk (continued)
Interest rate risk (continued)
At 31 December 2019 the effective interest rates were:
Fixed Rate Instruments
Weighted avg. Floating rate <=1 1-3 3 months More than 1
Total effective IR instruments month months 1 year year
Financial Assets
Cash and balances with
Central Bank 736,009 - - 736,009 - - -
Restricted balances 2,017,749 -0.10% 2,017,749 - - - -
Investment
in securities at FVOCI 9,230,939 4.49% - 108,889 93,107 1,860,802 7,168,140
Loans and advances to banks
and financial institutions 3,279,997 0.23% 1,636,236 1,643,761 - - -
Loans and advances to
customers 14,669,657 5.24% 12,624,727 249,185 10,783 411,997 1,372,965
Total 29,934,351 3.97% 16,278,712 2,737,844 103,890 2,272,799 8,541,105
Financial Liabilities
Due to banks 24,298 0.00% - 24,298 - - -
Due to customers 26,588,459 0.86% - 12,933,102 1,243,380 4,937,713 7,474,264
Repurchase
Agreements - 0.00% - - - - -
Subordinated
term debt 245,495 4.50% - - - - 245,495
Lease liabilities 956,506 2.55% - 5,293 10,595 46,228 894,390
Other liabilities 245,864 0.00% - 245,864

Total 28,060,622 0.94% - 13,208,557 1,253,975 4,983,941 8,614,149

REPRICING / DURATION GAP 1,873,729 3.03% 16,278,712 (10,470,713) (1,150,085) (2,711,141) (73,044)

29
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

5. Risk Management Disclosures (continued)


b) Market risk (continued)
Interest rate risk (continued)
At 31 December 2018 the effective interest rates were:
Weighted Floating Fixed Rate Instruments
avg. effective rate <=1 1-3 3 months More than 1
Total IR instruments Month months 1 year year
Financial Assets
Cash and balances with
Central Bank 514,799 - - 514,799 - - -
Restricted balances 1,677,859 0.40% 1,677,859 - - - -
Investment in securities at
FVOCI 7,540,288 5.60% - 14,287 534,918 357,934 6,633,149
Loans and advances to banks
and financial institutions 2,448,132 -0.17% 1,213,881 1,234,251 - - -
Loans and advances to
customers 11,713,074 5.51% 9,803,028 270,187 10,797 521,126 1,107,936
Total 23,894,152 4.51% 12,694,768 2,033,524 545,715 879,060 7,741,085
Financial Liabilities
Due to banks 16,045 0.00% - 16,045 - - -
Due to customers 20,807,370 0.92% - 8,825,053 623,254 5,899,614 5,459,449
Repurchase
Agreements 202,770 0.85% - 202,770 - - -
Other liabilities 73,279 0.00% - 73,279 - - -
Total 21,099,464 0.90% - 9,117,147 623,254 5,899,614 5,459,449

REPRICING / DURATION GAP 2,794,688 3.61% 12,694,768 (7,083,623) (77,539) (5,020,554) 2,281,636

30
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

5. Risk Management Disclosures (continued)


b) Market risk (continued)

Currency risk
Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate
because of changes in foreign exchange rates. The Bank is exposed to currency risk through
transactions in foreign currencies and on financial instruments that are denominated in a foreign
currency.
The Bank’s transactional exposures give rise to foreign currency gains and losses that are recognized
in the profit or loss. These exposures relate to those monetary assets and monetary liabilities of the
Bank that are not denominated in the presentation currency of the Bank.
As at 31 December 2019 the exposures were as follows (with all amounts denominated in foreign
currency being translated to ALL):

ALL USD EUR OTHER TOTAL


Financial Assets
Cash and balances
with Central Bank 262,923 76,233 376,566 20,287 736,009
Restricted balances 556,060 94,248 1,367,441 - 2,017,749
Investment in securities at FVOCI 8,493,768 - 737,171 - 9,230,939
Loans and advances to banks
and financial institutions 670,104 460,679 2,114,418 34,797 3,279,997
Loans and advances to customers 4,666,789 246,790 9,756,039 39 14,669,657
Assets held for sale 479,443 - - - 479,443
Total 7,372,490 877,949 22,108,232 55,123 30,413,794
Financial Liabilities
Due to banks 8,456 10 15,832 - 24,298
Due to other customers 12,757,663 889,692 12,888,527 52,577 26,588,459
Repurchase Agreements - - - - -
Subordinated term debt - - 245,495 - 245,495
Lease liabilities 22,470 - 934,036 - 956,506
Other liabilities 93,216 3,893 148,755 - 245,864
Total 12,881,805 893,595 14,232,645 52,577 28,060,622

Net Currency position 2,247,282 (15,646) 118,990 2,546 2,353,172

31
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

5. Risk Management Disclosures (continued)


b) Market risk (continued)
Currency risk (continued)
As at 31 December 2018 the exposures were as follows (with all amounts denominated in foreign
currency being translated to ALL):

ALL USD EUR OTHER TOTAL


Financial Assets
Cash and balances
with Central Bank 172,962 70,986 249,766 21,085 514,799
Restricted balances 789,721 65,091 823,047 - 1,677,859
Investment in securities at FVOCI 993,017 - 6,547,271 - 7,540,288
Loans and advances to banks and
financial institutions - 238,969 2,203,604 5,559 2,448,132
Loans and advances to customers 4,029,659 349,425 7,333,956 34 11,713,074
Assets held for sale 449,981 - 69,208 - 519,189
Total 6,435,340 724,471 17,226,852 26,678 24,413,341
Financial Liabilities
Due to banks - - 16,045 - 16,045
Due to other customers 9,978,594 741,136 10,061,975 25,665 20,807,370
Repurchase Agreements 202,770 - - - 202,770
Other liabilities 4,478 32,421 36,324 55 73,278
Total 10,185,842 773,557 10,114,344 25,720 21,099,463

Net Currency position (3,750,502) (49,086) 7,112,508 958 3,313,878

In respect of monetary assets and liabilities denominated in foreign currencies that are not
economically hedged, the Bank manages foreign currency risk in line with a policy that sets limits on
currency positions and dealer limits.

32
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

5. Risk Management Disclosures (continued)


c) Credit risk
The Bank is subject to credit risk through its lending activities and in cases where it acts as an
intermediary on behalf of customers or other third parties or issues guarantees. In this respect, the
credit risk for the Bank stems from the possibility that different counterparties might default on their
contractual obligations. The management of the credit risk exposures to borrowers is conducted
through regular analysis of the borrowers’ credit worthiness and the assignment of a rating grade.
Exposure to credit risk is also managed in part by obtaining collateral and guarantees.
IFRS 9 outlines a ‘three-stage’ model for impairment based on changes in credit quality since initial
recognition. Financial instruments in Stage 1 have their ECL measured at an amount equal to the
portion of lifetime expected credit losses that result from default events possible within the next 12
months. Instruments in Stages 2 or 3 have their ECL measured based on expected credit losses on a
lifetime basis.
According to the Bank’s methodology, all exposures are classified between Performing (including
Stage 1 and Stage 2) and Non- Performing exposures (Stage 3).
The following table summarizes the criteria that Fibank has approved for Staging of Loans:

Stage 1 Stage 2 Stage 3


Performing exposures up to Performing exposures more Exposures classified as non-
30 days past due. than 30 days past due. performing under the Bank
Forborne performing of Albania regulation
exposures up to 30 days Forborne performing
exposures more than 30
days past due.

The application of each criteria is described below:


- Stage 1 is assigned to performing exposures if none of Stage 2 & 3 criteria is met.
- The indicators of significant increase of credit risk that classify a loan into Stage 2 are the
following:
o Counterparties in a situation of more than 30 dpd.
o Forborne status in the last 12 months for performing exposures (FPE). Forborne /
restructured is identified as another criterion of credit deterioration since it
represents a risk of concession towards a client facing or about to face difficulties in
meeting its financial commitments.
- The indicators of significant increase of credit risk that classify a loan into Stage 3 are the
following:
o Counterparties classified as substandard (more than 90 days in delay) or worse under
the Bank of Albania Regulation “On Credit Risk Management”
o Restructured /Forborne performing exposures (FPE) restructured /forborne in the
last 12 months that are more than 30 days in delay at the reporting date.
o Debtor is considered unlikely to pay because Bank has information of (i) significant
financial difficulties, (ii) legal actions started for the borrower from state authorities
etc. (iii) disappearance of an active market where the borrower had a market share
because of financial difficulties;

33
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

5. Risk Management Disclosures (continued)


c) Credit risk (continued)
Credit quality by class of financial assets
The following table sets out information about the credit quality of loans and advances measured at
amortized cost and FVOCI debt investments for the year ended in December 2019. Unless specifically
indicated, for financial assets, the amounts in the table represent gross carrying amounts.
31 December 2019
Stage 1 Stage 2 Stage 3 Total
Loans and advances to customers
-Performing 13,460,440 528,962 - 13,989,402
-Past due (90-180 days in delay) - - 439,982 439,982
-Unlikely to pay - - 307,067 307,067
-Doubtful - - 586,126 586,126
Total 13,460,440 528,962 1,333,175 15,322,577
Loss allowance (193,106) (67,678) (392,136) (652,920)
Carrying amount 13,267,334 461,284 941,039 14,669,657

Investment securities at FVOCI


-Performing 9,230,939 - - 9,230,939
Total 9,230,939 - - 9,230,939
Carrying amount 9,230,939 - - 9,230,939
Loss allowance 4,988 - - 4,988

Loss allowance for investment securities at FVOCI is recognised in other comprehensive income and
not as a contra account to the carrying amount of the financial asset in the statement of financial
position (see Note 4 (g) (viii) Presentation of allowance for ECL in the statement of financial position).

34
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

5. Risk Management Disclosures (continued)


c) Credit risk (continued)
Credit quality by class of financial assets (continued)
The following table sets out information about the credit quality of loans and advances measured at
amortized cost, FVOCI debt investments for the year ended in December 2018.
31 December 2018
Stage 1 Stage 2 Stage 3 Total
Loans and advances to customers
-Performing 10,407,066 573,412 - 10,980,478
-Past due (90-180 days in delay) - - 441,069 441,069
-Unlikely to pay - - 354,990 354,990
-Doubtful - - 538,577 538,577
Total 10,407,066 573,412 1,334,636 12,315,114
Loss allowance (174,119) (63,219) (364,702) (602,040)
Carrying amount 10,232,947 510,193 969,934 11,713,074

Investment securities at FVOCI


-Performing 7,540,288 - - 7,540,288
Total 7,540,288 - - 7,540,288
Carrying amount 7,540,288 - - 7,540,288
Loss allowance 6,155 - - 6,155

35
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

5. Risk Management Disclosures (continued)


c) Credit risk (continued)
Credit quality by class of financial assets (continued)
The following table sets out information about the overdue status of loans and advances to customers
in Stages 1, 2 and 3.
As per days past due as at 31 December 2019:

Stage 1 Stage 2 Stage 3 Total


Gross carrying amount
-Current 10,384,348 17,523 - 10,401,871
-Overdue < 30 days 3,076,092 168,620 252,213 3,496,925
-Overdue > 30 days - 342,819 1,080,962 1,423,781
Total 13,460,440 528,962 1,333,175 15,322,577

As at 31 December 2018:

Stage 1 Stage 2 Stage 3 Total


Gross carrying amount
-Current 7,447,850 71,949 - 7,519,799
-Overdue < 30 days 2,959,216 141,754 456,244 3,557,214
-Overdue > 30 days - 359,709 878,392 1,238,101
Total 10,407,066 573,412 1,334,636 12,315,114

Amount arising from ECL


Inputs, assumptions and techniques used for estimating impairment
See accounting policy in Note 4 (g)(viii).
The Bank complied with the “Rules on the measurement of expected credit loss pursuant to standard
IFRS 9 (Impairment Policy)” approved by Steering Council which defines the methodological rules
adopted on Stage Assignment and on calculation of Expected Credit Loss for the financial assets
included in the following accounting categories: Amortised Cost (“AC”) and Fair Value Through Other
Comprehensive Income (“FVOCI”) pursuant to IFRS 9 standard. Performing Portfolio is divided into
two distinct Stages (Stage 1 for which 12- month expected loss is calculated and Stage 2 for which
lifetime expected loss is calculated) and the inclusion of forward-looking elements when assessing
expected loss. For the Non –Performing category (Stage 3 according to IFRS 9 standard) an Add-On
calculation is used when calculating expected loss in order to include forward looking elements.
Assessments for impairment are made in accordance with the Impairment Methodology of expected
credit loss pursuant to standard IFRS 9 (Impairment Policy)” according to which the performing
category is subject to collective assessment for impairment, while the other three categories (non-
performing) can be subject to either individual or collective assessment for impairment.

36
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

5. Risk Management Disclosures (continued)


c) Credit risk (continued)
Significant increase in credit risk
When determining whether the risk of default on a financial instrument has increased significantly
since initial recognition, the Bank considers reasonable and supportable information that is relevant
and available without undue cost or effort. This includes both quantitative and qualitative
information and analysis, based on the Bank’s historical experience and expert credit assessment and
including forward-looking information. The objective of the assessment is to identify whether a
significant increase in credit risk has occurred for an exposure.
Generally, there is a significant increase in credit risk before a financial asset becomes credit-
impaired or an actual default occurs: this simple fact is crucial to the purpose of IFRS9, which aims
at recognizing expected losses in a timely manner.
Together with “quantitative” indicators for increase in credit risk, a number of “qualitative” ones
can support the assessment. The IFRS9 Principle itself specifies a non-exhaustive list of such
indicators; among those figures:
- an actual or expected significant change in the operating results of the borrower;
- decisions by the Bank that credit risk on that instrument is significantly higher or that
additional collateral and/or covenant should be required with respect to when that specific
instrument was originated;
- significant changes, such as reductions in financial support from a parent entity or other
affiliate or an actual or expected significant change in the quality of credit enhancement,
that are expected to reduce the borrower’s economic incentive to make scheduled
contractual payments;
- expected changes in the loan documentation including an expected breach of contract that
may lead to covenant waivers or amendments, interest payment holidays, interest rate step-
ups, requiring additional collateral or guarantees, or other changes to the contractual
framework of the instrument;
- changes in the Bank’s credit management approach in relation to the financial instrument.
In practice, qualitative and quantitative indicators can be employed together.
Definition of default
In terms of Stage 3, IFRS 9 specifies that when defining default for the purposes of determining the
risk of a default occurring, the Bank shall apply a default definition that is in compliance with the
definition used for internal credit risk management purposes for the relevant financial instrument
and consider qualitative indicators (for example, financial covenants) when appropriate. However,
there is a rebuttable presumption that default does not occur later than when a financial asset is 90
days past due unless the Bank has reasonable and supportable information to demonstrate that a
more lagging default criterion is more appropriate. In any case, guidelines from competent
authorities specify that institutions should be guided by the definition used for regulatory purposes
provided in Article 178 of Regulation (EU) 575/2013 (Capital Requirement Regulation CRR).

37
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

5. Risk Management Disclosures (continued)


c) Credit risk (continued)
Amount arising from ECL (continued)
Expected credit losses
The framework, IFRS 9 (International Financial Reporting Standard) – Financial Instruments, is based
on the estimation of expected losses. When significant deterioration of the credit quality is
recognized, the new concept of Lifetime expected loss is introduced. Lifetime expected loss covers
expected loss for the whole IFRS 9 specifies that if the credit risk on a financial instrument has
increased significantly since initial recognition, an entity shall measure the loss allowance for that
financial instrument at an amount equal to Lifetime expected credit losses and if the credit risk on
such instrument has not increased significantly, 12-months expected losses should be calculated
instead.
For performing exposures without a significant increase in credit risk that are classified in Stage 1,
at the origination of each non-impaired financial instrument, 12-months expected credit losses are
recognized. The formulas used for impairment calculation for IFRS9 purposes for 12-months Expected
Loss (Stage 1) is by multiplying the 12-month PD by LGD and EAD.
Lifetime ECL is calculated by multiplying the lifetime PD by LGD and EAD. The Bank employs
statistical models to analyse the data collected and generate estimates of the remaining lifetime PD
of exposures and how these are expected to change as a result of the passage of time. The Bank
collects performance and default information about its credit risk exposures analysed by type of
product and borrower
LGD is the magnitude of the likely loss if there is a default. The Bank estimates LGD parameters based
on the history of loss rates from defaulted counterparties. The LGD models consider the structure,
collateral, seniority of the claim, counterparty industry and recovery costs of any collateral that is
integral to the financial asset. LGD estimates are calculated on a discounted cash flow basis using
the effective interest rate as the discounting factor.
EAD is an estimate of the total exposure at the reporting date, taking into account expected changes
in the exposure after reporting date, including expected drawdowns on committed facilities. The
credit conversion factor is used to convert the amount of a credit line (the unused part) and other
off-balance sheet amounts to an EAD amount. It is a modelled assumption, which represents a
proportion of any undrawn exposure that is expected to be drawn prior to default event occurring.
For each type of product, the CCF factor the Bank is applying is as below:
Unused part of Term Loans= 0%
Unused part of Overdrafts= 100%
Unused part of Credit Cards = 100%
Unused part of Credit Cards classified as “blocked”, “closed” or “Grey List” = 0%

38
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

5. Risk Management Disclosures (continued)


c) Credit risk (continued)
Amount arising from ECL (continued)
The following tables show reconciliations from the opening to the closing balance for loans and
advances to customers.

2019
Stage 1 Stage 2 Stage 3 Total
Gross carrying amount
Balance at 1 January 10,407,066 573,412 1,334,636 12,315,114
-Transfer to stage 1 495,770 (412,256) (83,514) -
-Transfer to stage 2 (342,331) 406,674 (64,343) -
-Transfer to stage 3 (159,446) (105,689) 265,135 -
-Net remeasurment (1,288,398) (50,231) 29,468 (1,309,161)
-New loans originated 5,511,756 160,555 53,531 5,725,842
-Write-offs - - (71,685) (71,685)
-Other movements (1,163,977) (43,503) (130,053) (1,337,533)
Balance at 31 December 13,460,440 528,962 1,333,175 15,322,577

Loss allowances
Balance at 1 January 174,119 63,219 364,702 602,040
-Transfer to stage 1 57,834 (51,989) (5,845) -
-Transfer to stage 2 (5,333) 15,644 (10,311) -
-Transfer to stage 3 (2,533) (2,585) 5,118 -
-Net remeasurment (90,748) 24,794 131,948 65,994
-New loans originated 80,724 25,316 6,201 112,241
-Write-offs - - (63,375) (63,375)
-Other movements (20,957) (6,721) (36,302) (63,980)
Balance at 31 December 193,106 67,678 392,136 652,920

39
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

5. Risk Management Disclosures (continued)


c) Credit risk (continued)
Amount arising from ECL (continued)

2018
Stage 1 Stage 2 Stage 3 Total
Loans and advances to customers
Balance at 1 January 8,554,279 417,024 1,204,455 10,175,758
-Transfer to stage 1 64,899 (48,848) (16,051) -
-Transfer to stage 2 (541,673) 555,852 (14,179) -
-Transfer to stage 3 (47,590) (263,354) 310,944 -
-Net remeasurment of loss allowances (1,012,759) (82,173) (23,942) (1,118,874)
-New loans originated 4,622,079 29,925 56,475 4,704,479
-Write-offs - - (77,894) (77,894)
-Other movements (1,232,169) (31,014) (105,172) (1,368,355)
Balance at 31 December 10,407,066 573,412 1,334,636 12,315,114

Loans and advances to customers


Balance at 1 January 189,156 36,604 383,040 608,800
-Transfer to stage 1 23,126 (15,351) (7,775) -
-Transfer to stage 2 (10,869) 11,638 (769) -
-Transfer to stage 3 (1,348) (13,002) 14,350 -
-Net remeasurment of loss allowances (74,936) 41,170 54,024 20,258
- New loans originated 77,362 4,343 16,483 98,188
-Write-offs - - (68,437) (68,437)
-Other movements (28,372) (2,183) (26,214) (56,769)
Balance at 31 December 174,119 63,219 364,702 602,040

40
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

5. Risk Management Disclosures (continued)


c) Credit risk (continued)
Amount arising from ECL (continued)
Loss allowances (continued)
The exposures as per risk category at 31 December 2019 were as follows:

Stage 1 Stage 2 Stage 3 Total


Gross exposure
-Standard 13,448,477 235,386 - 13,683,863
-Watch 11,963 293,576 - 305,539
-Substandard - - 439,982 439,982
-Doubtful - - 307,067 307,067
-Lost - - 586,126 586,126
Total 13,460,440 528,962 1,333,175 15,322,577

Loss allowances
-Standard (192,964) (32,817) - (225,781)
-Watch (142) (34,861) - (35,003)
-Substandard - - (43,669) (43,669)
-Doubtful - - (30,190) (30,190)
-Lost - - (318,277) (318,277)
-Total (193,106) (67,678) (392,136) (652,920)

Net exposure
-Standard 13,255,513 202,569 - 13,458,082
-Watch 11,821 258,715 - 270,536
-Substandard - - 396,313 396,313
-Doubtful - - 276,877 276,877
-Lost - - 267,849 267,849
Total 13,267,334 461,284 941,039 14,669,657

41
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

5. Risk Management Disclosures (continued)


c) Credit risk (continued)
The exposures as at 31 December 2018 were as follows:

Stage 1 Stage 2 Stage 3 Total


Gross exposure
-Standard 10,380,841 109,445 - 10,490,286
-Watch 26,225 463,967 29,273 519,465
-Substandard - - 411,796 411,796
-Doubtful - - 354,990 354,990
-Lost - - 538,577 538,577
Total 10,407,066 573,412 1,334,636 12,315,114

Loss allowances
-Standard (173,706) (7,197) - (180,903)
-Watch (413) (56,022) (9,059) (65,494)
-Substandard - - (39,300) (39,300)
-Doubtful - - (56,504) (56,504)
-Lost - - (259,839) (259,839)
-Total (174,119) (63,219) (364,702) (602,040)

Net exposure
-Standard 10,207,135 102,248 20,213 10,309,383
-Watch 25,812 407,945 372,496 453,970
-Substandard - - 298,486 372,496
-Doubtful - - 278,739 298,486
-Lost - - 969,934 278,739
Total 10,232,947 510,193 20,213 11,713,074

In addition, the Bank is exposed to off-balance sheet credit risk through commitments to extend
credit and guarantees issued (see note 30).
Concentrations of credit risk (whether on or off balance sheet) that arise from financial instruments
exist for counterparties when they have similar economic characteristics that would cause their
ability to meet contractual obligations to be similarly affected by changes in economic or other
conditions. The major concentrations of credit risk arise by location and type of customer in relation
to the Bank’s investments, loans and advances, commitments to extend credit and guarantees issued.
Write-off policy
The Bank writes off a loan (and any related allowances for impairment losses) when the Bank’s
Steering Council determines that the loans are uncollectible. This is generally the case when the
Steering Council determines that significant changes in the borrower does not have assets or sources
of income that could generate sufficient cash flows to repay the amounts subject to the write-off.
The loan is classified as lost for regulatory reporting purpose for a period of at least 3 years. The
Bank’s policy is also in compliance with the amended Regulation no.62 dated 14.09.2011 “On
Administration of Credit Risk for Banks and Foreign Banks Subsidiaries”.

42
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

5. Risk Management Disclosures (continued)


c) Credit risk (continued)
An analysis of concentration of credit risk by economic sector and their respective impairment
allowances for loans and advances to customers are presented in the table below:
As at As at
31 December 2019 31 December 2018
Trade 2,915,499 2,836,408
Private individuals 6,020,915 4,427,976
Communication 7,341 19,876
Construction 1,017,301 1,062,288
Tourism 414,805 301,473
Agriculture 275,174 321,718
Transportation 573,158 368,228
Industry 1,791,669 1,375,028
Services 1,865,400 997,601
Finance 441,315 604,518
Gross credit risk 15,322,577 12,315,114
Trade (185,124) (207,175)
Private individuals (271,302) (248,222)
Communication (189) (350)
Construction (53,930) (63,022)
Tourism (10,061) (1,705)
Agriculture (6,737) (7,323)
Transportation (7,456) (5,932)
Industry (56,723) (24,140)
Services (53,805) (34,440)
Finance (7,593) (9,731)
Less allowance for impairment (652,920) (602,040)

Net Credit Risk 14,669,657 11,713,074

The amounts reflected in the tables represent the maximum accounting loss that would be recognized
at the reporting date if counterparties failed completely to perform as contracted and any collateral
or security proved to be of no value. The amounts, therefore, greatly exceed expected losses, which
are included in the allowance for impairment.
The Bank’s policy is to require suitable collateral to be provided by certain customers prior to the
disbursement of approved loans. Guarantees and letters of credit are also subject to strict credit
assessments before being provided. The agreements specify monetary limits for the Bank’s
obligations. The extent of collateral held for guarantees and letters of credit is at least 100 percent
of the amount extended.
Collateral for loans, guarantees, and letters of credit is usually in the form of cash, mortgage,
inventory, listed investments, or other property.

43
Notes to the financial statements for the year ended 31 December 2019

5. Risk Management Disclosures (continued)


c) Credit risk (continued)
Collaterals held and other credit enhancements
The estimated cash flows derived from the collateral, including guarantees securing the exposures,
are usually the main source of future cash flows from non-performing loans. Some of the valuation
parameters used for the calculation are:
- Realizable value of collaterals, which is estimated by reducing the appraised market value
of the collateral with a discount factor. This takes into account the characteristics of similar
groups of collaterals. It presumes an average recoverable value of specific collateral, based
on the Bank’s experience.
- Timing of the expected cash flow, which represents the expected recovery time (in years)
for a specific type of collateral.
Collateral, generally, is not held over loans and advances to financial institutions, except when
securities are held as part of reverse repurchase and securities borrowing activity. Usually, collateral
is not held against investment securities, and no such collateral was held at 31 December 2019 and
2018. Estimates of fair value are based on the value of collateral assessed at the time of borrowing
and are updated every one to three years.
The table below shows a breakdown of total credit extended to customers by the Bank and their
respective impairment allowances, other than financial institutions, by type of collateral, up to a
maximum of the outstanding liability:

As at As at
31 December 2019 31 December 2018
Money deposits 909,852 945,563
Mortgage 11,169,396 8,638,118
Guarantee 3,295 5,064
Pledge of machines 701,752 741,000
Pledge of receivables 479,683 516,000
Other collateral 2,058,599 1,469,369
Gross credit risk 15,322,577 12,315,114

Money deposits (21,177) (18,504)


Mortgage (335,902) (276,572)
Guarantee (1,921) (2,413)
Pledge of machines (38,511) (58,433)
Pledge of receivables (34,077) (36,552)
Other collateral (221,332) (209,566)
Less allowance for impairment (652,920) (602,040)

Net Credit Risk 14,669,657 11,713,074

44
Notes to the financial statements for the year ended 31 December 2019

5. Risk Management Disclosures (continued)


d) Capital management
Regulatory capital
The Bank’s lead regulator, BoA sets and monitors capital requirements. In implementing current capital
requirements, the Bank is required to maintain a minimum prescribed ratio of 12% of total capital to
total risk-weighted assets. Risk-weighted assets are determined according to specified requirements
that seek to reflect the varying levels of risk attached to assets and off-balance sheet exposures.
The Bank calculates requirements for credit risk for its exposures based on capital adequacy regulations
established by the BoA. Exposures are taken into account using their statement of financial position
amount. Off-balance-sheet credit related commitments are taken into account by applying different
categories of conversion factors, designed to convert these items into statement of financial position
equivalents. The resulting equivalent amounts are then weighted for risk using different percentages
(0%, 20%, 50%, 100%, and 150%) depending on the class of exposure. Various credit risk mitigation
techniques are used, for example collateralized transactions and guarantees. The Bank’s regulatory
capital is analyzed into two tiers:
● Tier 1 capital (core capital), which includes ordinary share capital, share premium, statutory
reserve, other general reserves, retained earnings from prior years and minority interests after
deductions for goodwill, intangible assets and unrealized loss from available for sale investments.
● Tier 2 capital (supplementary capital), which includes qualifying subordinated liabilities, namely
perpetual debt and subordinated term debt.
The following limits are applied to elements of the capital base: Qualifying tier 2 capital cannot exceed
tier 1 capital; and qualifying term subordinated loan capital may not exceed 50 percent of tier 1 capital.
The Bank’s policy is to maintain a strong capital base so as to maintain investor, creditor and market
confidence and to sustain future development of the business. The impact of the level of capital on
shareholders’ return is also recognized and the Bank recognizes the need to maintain a balance between
the higher returns that might be possible with greater gearing and the advantages and security afforded
by a sound capital position.
The management of the Bank performs daily monitoring over all positions of assets and liabilities,
income and expenses. The management analyzes profitability, liquidity and the cost of funds and
implements measures in respect to credit, market (primarily interest rate) and liquidity risk, thus
limiting possible negative effects from the global financial and economic crisis. In this way the Bank
responds to the challenges of the market environment, seeking to maintain a stable capital and liquidity
position.
The Bank has complied with all externally imposed capital requirements throughout the period.
According to the requirements of BoA the capital adequacy ratio as at 31 December 2019 was 14.26%
(31 December 2018: 15.56%) compared to a minimum of 12% stipulated by the Bank of Albania.

45
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

6. Financial assets and liabilities


a) Accounting classification and fair values
The Bank's accounting policy on fair value measurement is discussed in accounting policy 4.g.(vii).
The Bank measures fair values using the following fair value hierarchy that reflects the significance
of the inputs used in making the measurements:'
-Level 1: Quoted market price (unadjusted) in an active market for an identical instrument.
-Level 2: Valuation techniques based on observable inputs, either directly (i.e., as prices) or
indirectly (i.e., derived from prices). This category includes instruments valued using: quoted market
prices in active markets for similar instruments; quoted prices for identical or similar instruments in
markets that are considered less than active; or other valuation techniques where all significant
inputs are directly or indirectly observable from market data.
-Level 3: Valuation techniques using significant unobservable inputs. This category includes all
instruments where the valuation technique includes inputs not based on observable data and the
unobservable inputs have a significant effect on the instrument's valuation. This category includes
instruments that are valued based on quoted prices for similar instruments where significant
unobservable adjustments or assumptions are required to reflect differences between the
instruments.
Valuation techniques include net present value and discounted cash flow models, comparison to
similar instruments for which market observable prices exist and based on a current yield curve
appropriate for the remaining term to maturity. Assumptions and inputs used in valuation techniques
include risk-free and benchmark interest rates, credit spreads and other premiums used in estimating
discount rates, bond and equity prices, foreign currency exchange rates, equity and equity index
prices and expected price volatilities and correlations. The objective of valuation techniques is to
arrive at a fair value determination that reflects the price of the financial instrument at the reporting
date, which would have been determined by market participants acting at arm's length.
The Bank uses widely recognised valuation models for determining the fair value and use only
observable market data and require little management judgments and estimation. Observable prices
and model inputs are usually available in the market for listed debt and equity securities. Availability
of observable market prices and model inputs reduces the need for management judgment and
estimation and also reduces the uncertainty associated with determination of fair values. Availability
of observable market prices and inputs varies depending on the products and markets and is prone
to changes based on specific events and general conditions in the financial markets.
As at 31 December 2019 and 2018 all financial instruments are measured at amortized cost, except
available for sale assets which have been measured at fair value and the respective fair values have
been disclosed in note 6. All financial assets and liabilities fair values disclosed have been measured
based on Level 2 hierarchy.

46
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

6. Financial assets and liabilities (continued)


a) Accounting classification and fair values
The table below sets out the carrying amounts and fair values of the Bank’s financial assets and
financial liabilities:
As at 31 December 2019
Investment Loans Other Total
in securities and amortized carrying Fair
Note at FVOCI Receivables cost amount Value
Cash and balances
with Central Bank 15 - 736,009 - 736,009 736,009
Restricted balances 16 - 2,017,749 - 2,017,749 2,017,749
Investment in
securities at FVOCI 17 9,230,939 - - 9,230,939 9,230,939
Loans and advances to
banks and financial
institutions 18 - 3,279,997 - 3,279,997 3,279,997
Loans and advances to
customers 19 - 14,669,657 - 14,669,657 14,669,657
Due to credit
institutions 24 - 24,298 - 24,298 24,298
Due to customers 25 - 26,588,459 - 26,588,459 26,588,459
Subordinated debt 27 - - 245,495 245,495 245,495
Lease liabilities 28 - - 956,506 956,506 956,506
Other liabilities - 245,864 - 245,864 245,864

As at 31 December 2018
Investment Loans Other Total
in securities and amortized carrying Fair
Note at FVOCI Receivables cost amount Value
Cash and balances
with Central Bank 15 - 514,799 - 514,799 514,799
Restricted balances 16 - 1,677,859 - 1,677,859 1,677,859
Investment in
securities at FVOCI 17 7,540,288 - - 7,540,288 7,540,288
Loans and advances to
banks and financial
institutions 18 - 2,448,132 - 2,448,132 2,448,132
Loans and advances to
customers 19 - 11,713,074 - 11,713,074 11,713,074
Due to credit
institutions 24 - 16,045 - 16,045 16,045
Due to customers 25 - 20,807,370 - 20,807,370 20,807,370
Repurchase
Agreements 26 - 202,770 - 202,770 202,770
Other liabilities - 73,278 - 73,278 73,278

The fair value of cash and cash equivalents, loan and advances to banks is approximately equal to the
carrying value, because of their short-term maturity. The fair value of loans and advances to
customers is approximately equal to their carrying value due to fact that the main part of the loan
portfolio carries floating interest rates which reflect the changes in the market conditions.

47
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

7. Net interest income


Year ended Year ended
31 December 2019 31 December 2018
Interest and similar income
Interest and similar income arises from:
Accounts and placements with banks 22,948 7,806
Loans to individuals and households 266,211 218,253
Loans to small and medium enterprises 550,424 545,728
Income from securities transactions 354,024 385,685

1,193,607 1,157,472
Interest expense and similar charges
Interest expense and similar charges arise from:
Deposits from banks (71) (1,892)
Deposits from customers (208,567) (161,676)
Repurchase agreements (240) (7,490)
Placements with banks (15,101) (9,936)
Interest on subordinated debt (7,495) -
Lease agreement and other (23,809) -

(255,282) (180,994)

Net interest income 938,325 976,478

Included within various line items under interest income for the year ended 31 December 2019 is a
total of ALL 150,917 thousand (2018: ALL 133,724 thousand) accrued on individually impaired loans.

48
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

8. Net fee and commission income

Year ended Year ended


31 December 2019 31 December 2018
Fee and commission income
Customer accounts 106,285 96,895
Payments and transactions 44,361 33,856
Card business 54,782 43,370
Letters of credit and guarantees 3,684 2,082
Other 88,158 87,549

297,270 263,752
Fee and commission expense
Card business (39,358) (34,792)
Correspondent accounts (5,151) (5,465)
Other (7,445) (6,308)

(51,954) (46,565)

Net fee and commission income 245,316 217,187

In other fees and commission income are included fees from depositary, custodian and brokerage
services in the amount of ALL 69,867 thousand (2018: ALL 69,759 thousand). The first one derive from
safekeeping of assets of investment and pension funds for which Fibank Albania serves as depositary.
Custody fees are generated from the service of safekeeping corporate securities on behalf of the
clients. Meanwhile brokerage services consist in intermediary for transaction with financial
instruments, including participation in primary markets of Government of Albania securities on behalf
of clients and execution of transactions on behalf of investment and pension funds for which Fibank
Albania serves as depositary.

9. Net Trading Income


Net trading income comprises foreign exchange gains and losses.

10. Other operating income


Other operating income mainly refers to net of income from sale of investment securities in the
amount of ALL 191,421 thousand (2018: ALL 57,934 thousand) and amortisation of premiums or
discounts of investment securities in amount of ALL 22,344 thousand (2018: ALL 14,421 thousand).

49
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

11. Personnel expenses


Year ended Year ended
31 December 2019 31 December 2018
Wages and salaries 262,686 211,988
Compulsory social security obligations 31,210 23,358
Voluntary social security obligations 6,788 6,794
Training expenses 6,844 6,603
Other allowances to staff 2,920 4,538
Total 310,448 253,281

At 31 December 2019, the Bank employed a total of 218 (2018: 183) staff and senior management.

12. General administrative expenses


Year ended Year ended
31 December 2019 31 December 2018
Advertising and PR 26,192 38,918
Maintenance and repair 29,719 27,844
Administration, consultancy and other costs 101,681 88,253
Total 157,592 155,015

The total fee for the audit of the financial statements for the year ended 31 December 2019 is ALL
1,786 thousand.

13. Other income/(expenses), net


Year ended Year ended
31 December 2019 31 December 2018
Premium contribution to deposit insurance schemes (74,933) (61,478)
Penalties and fines (2,060) (4,020)
Other income/(expenses), net (27,082) 1,699
Total (104,075) (63,799)

50
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

14. Income tax expense


The amount recognized in profit or loss:
Year ended Year ended
31 December 2019 31 December 2018

Current tax (88,269) (80,946)


Deferred tax (1,895) (502)
Income tax expense (90,164) (81,448)

The amount recognized in other comprehensive income:

Year ended Year ended


31 December 2019 31 December 2018
Investment in securities at FVOCI 11,277 (53,039)
Total 11,277 (53,039)

The following is a reconciliation of effective tax rate:


Effective Effective
2019 Tax rate 2018 Tax rate
Profit for the period 482,481 401,032
Total income tax 90,164 81,448
Profit excluding income tax expense 572,645 482,480
Income tax using the Bank’s domestic tax rate 85,897 15% 72,372 15.0%
Non-deductible expenses 4,222 0.7% 1,447 0.3%
Change in unrecognized temporary differences 45 0.0% 7,629 1.6%
Total tax expense 90,164 18.7% 81,448 20.3%

51
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

14. Income tax expense (continued)


Year ended Year ended
31 December 2019 31 December 2018
Profit for the period excluding tax expense 572,645 482,480
Non-deductible expenses 28,148 9,644
Personnel expenses 2,920 2,810
Other expenses 25,228 6,834
Amortization and depreciation expense (10,751) (662)
Effect of initial application of new IFRS standards (1,579) 48,178
Taxable profit 588,463 539,640
Current year tax @ 15% (2018: 15%) (88,269) (80,946)

Deferred tax are calculated on all temporary differences by using tax rate of 15%. Movements in
deferred tax are shown in the following table.

2019 2018
Balance at 1 January (67,958) (14,417)
Accelerated depreciation of fixed assets (1,658) (502)
Revaluation of Investment in securities at FVOCI 11,277 (53,039)
Net effect of IFRS 16 application (236) -
Deferred tax asset / (liability) at 31 December (58,575) (67,958)

Recognized deferred tax assets and liabilities as at 31 December 2019 and 2018 are attributable to
the following:
2019 2018
Assets Liabilities Net Assets Liabilities Net
Accumulated depreciation 6,297 - 6,297 7,954 - 7,954
Lease liabilities 143,476 - 143,476 - - -
Investment in securities at FVOCI - (64,635) (64,635) - (75,912) (75,912)
Right of use assets - (143,713) (143,713) - - -
Net tax assets / (liabilities) 149,773 (208,348) (58,575) 7,954 (75,912) (67,958)

52
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

15. Cash and balances with Central Bank


As at As at
31 December 2019 31 December 2018
Cash on hand
in Albanian Lek 233,161 129,200
in foreign currencies 468,184 341,724
Balances with central bank 34,664 43,875
Total 736,009 514,799

16. Restricted balances


As at As at
31 December 2019 31 December 2018
Statutory reserve 2,017,749 1,677,859
Total 2,017,749 1,677,859

Supervisory Council of Bank of Albania upon decision no.13, dated 7 February 2018, required the
minimum of obligatory reserve for client deposits in Albanian Lek at 7.5% and 5.0% respectively of
outstanding deposits with maturity less than 12 months and with maturity between 1 and 2 years.
Meanwhile for client deposits in foreign currency the minimum obligatory reserve is 12.5% for the
deposits in foreign currency when the value of the ratio of liabilities in the relevant currency included
in the reserve requirement to which the 0 (zero) percent rate of required reserve does not apply to
total liabilities included in the reserve requirement to which it does not apply the 0 (zero) percent
rate of required reserve” for the bank is up to 50% and 20% for that part of deposits in foreign currency
deposits to which the abovementioned ratio is over 50%.
Supervisory Council of Bank of Albania upon decision no.12, dated 7 February 2018, defined that up
to 70% of the statutory reserve in ALL can be available for the Bank’s day-to-day operations.

17. Investments in securities at FVOCI


Investment in securities at FVOCI comprise treasury bills and bonds of the Albanian and EU countries
Governments.
As at As at
31 December 2019 31 December 2018
Treasury Bills 1,465,316 161,981
Government Bonds 7,765,623 7,378,307
Total 9,230,939 7,540,288

As at 31 December 2019 Treasury Bonds with a carrying amount of nil (2018: ALL 201,000 thousand)
were pledged as security for the purchase agreements portfolio (note 27). For Treasury Bills discount
as at 31 December 2019 were ALL 17,445 thousand (2018: 1,541). As at 31 December 2019 for
Government Bonds discount amounted ALL 78,241 thousand (2018: 62,949 thousand) and accrued
interest amounted ALL 115,731 thousand (2018: 115,206 thousand).

53
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

18. Loans and advances to banks and financial institutions


(a) Analysis by type
As at As at
31 December 2019 31 December 2018
Current accounts with banks 1,636,236 1,213,881
Placements due from banks 1,643,649 1,234,200
Accrued interest 112 51
Total 3,279,997 2,448,132

(b) Geographical analysis


As at As at
31 December 2019 31 December 2018
Domestic banks and financial institutions 1,513,666 1,234,251
Foreign banks and financial institutions 1,766,331 1,213,881
Total 3,279,997 2,448,132

(c) Analysis by currency


As at As at
31 December 2019 31 December 2018
In Albanian Lek 670,103 -
In Euro 2,114,418 2,203,604
In USD 460,679 238,969
In other currencies 34,797 5,559
Total 3,279,997 2,448,132

54
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

19. Loans and advances to customers

As at As at
31 December 2019 31 December 2018
Loans and advances to customers 15,322,577 12,315,114
Less impairment loss allowance (652,920) (602,040)
Net loans and advances to customers 14,669,657 11,713,074

Loans by sector as at 31 December 2019 and 2018


As at As at
31 December 2019 31 December 2018
Retail customers 6,080,542 4,467,014
Consumer loans 1,274,816 969,071
Mortgage loans 4,549,610 3,298,452
Credit cards 256,116 199,491
Small and medium enterprises 9,242,035 7,848,100
Less allowances (652,920) (602,040)
Net loans and advances to customers 14,669,657 11,713,074

Loans and advances to customers composed by sector as at 31 December 2019 were as follows:

Gross Expected credit Carrying


Amount losses Amount
Retail customer 6,080,542 (304,369) 5,776,173
Consumer loans 1,274,816 (114,475) 1,160,341
Mortgage loans 4,549,610 (77,081) 4,472,529
Credit cards 256,116 (112,813) 143,303
Small and medium enterprises 9,242,035 (348,551) 8,893,484
Total 15,322,577 (652,920) 14,669,657

Loans and advances to customers composed by sector as at 31 December 2018 were as follows:

Gross Expected credit Carrying


Amount losses Amount
Retail customer 4,467,014 (266,649) 4,200,365
Consumer loans 969,071 (110,837) 858,234
Mortgage loans 3,298,452 (82,102) 3,216,350
Credit cards 199,491 (73,710) 125,781
Small and medium enterprises 7,848,100 (335,391) 7,512,709
Total 12,315,114 (602,040) 11,713,074

55
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

19. Loans and advances to customers (continued)


Changes in expected credit losses for year ended 31 December 2019 were as follows:

2019 2018
Stage 1
Balance at January 1 (174,119) (189,156)
Net (loss) / recoveries for the year (18,987) 15,037
Charge for the year (86,848) (78,854)
Recoveries 67,861 93,891
Write-offs - -
Balance at December 31 (193,106) (174,119)
Stage 2
Balance at January 1 (63,219) (36,604)
Net (loss)/recoveries for the year (4,459) (26,615)
Charge for the year (66,635) (58,168)
Recoveries 62,176 31,553
Write-offs - -
Balance at December 31 (67,678) (63,219)
Stage 3
Balance at January 1 (364,702) (383,040)
Net (loss)/recoveries for the year (107,016) (60,191)
Charge for the year (182,633) (111,730)
Recoveries 75,617 51,539
Write-offs 79,582 78,529
Balance at December 31 (392,136) (364,702)

Total ECL allowance (652,920) (602,040)

56
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

20. Property and equipment


Building and Fittings, Machinery and Office
Leasehold fixtures & Motor electronic Computer and equipment Fixed assets
improvements installations Vehicles Equipment IT system and other in progress Total
Cost
Balance at 1 January 2018 121,196 50,888 27,289 90,971 91,498 50,793 19,430 452,065
Additions 12,463 15,366 - 8,342 25,765 10,448 8,053 80,437
Disposals - - (4,531) - - - - (4,531)
Transfers 2,138 5,559 - 112 3,680 618 (12,107) -
Balance at 31 December 2018 135,797 71,813 22,758 99,425 120,943 61,859 15,376 527,971
Recognition of right of use
assets (IFRS 16) 941,546 - - - - - - 941,546
Adjusted
balance at 1 January 2019 1,077,343 71,813 22,758 99,425 120,943 61,859 15,376 1,469,517
Additions 105,390 16,254 - 21,094 10,693 8,842 5,807 168,080
Disposals - - (3,013) - - - - (3,013)
Transfers 60 - - 264 5,924 77 (6,325) -
Balance at 31 December 2019 1,182,793 88,067 19,745 120,783 137,560 70,778 14,858 1,634,584
Accumulated Depreciation
Balance at 1 January 2018 (110,566) (42,788) (15,219) (81,249) (75,746) (43,931) - (369,499)
Charge for the period (4,268) (3,031) (1,678) (4,167) (6,788) (2,589) - (22,521)
Disposals - - 2,681 - - - - 2,681
Balance at 31 December 2018 (114,834) (45,819) (14,216) (85,416) (82,534) (46,520) - (389,339)
Charge for the period (76,104) (3,600) (1,372) (2,222) (9,782) (2,550) - (95,630)
Disposals - - 3,013 - - - - 3,013
Balance at 31 December 2019 (190,938) (49,419) (12,575) (87,638) (92,316) (49,070) - (481,956)
Net book value
As at 1 January 2018 10,630 8,100 12,070 9,722 15,752 6,862 19,430 82,566
As at 31 December 2018 20,963 25,994 8,542 14,009 38,409 15,339 15,376 138,632
As at 31 December 2019 991,855 38,648 7,170 33,145 45,244 21,708 14,858 1,152,628

57
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

20. Property and equipment (continued)


Other
Fixed assets in progress include all assets purchased and not yet put in use. Leasehold improvements
consists in investments done for rented premises.
Included in the net carrying amount of property, plant and equipment, as at 31 December 2019 are
right-of-use assets as follows:

Accumulated 31 December
Balance depreciation 2019
Office buildings 1,001,297 (67,565) 943,732
Warehouse & related facilities 29,821 (5,468) 24,353
Total right of use asset 1,031,118 (73,033) 958,085

21. Intangible assets

Patents, Software Intangible


copyrights and other assets
and trademarks intangible assets in progress Total
Cost
Balance at 1 January 2018 11,994 62,629 2,651 77,274
Additions 2,577 4,716 3,584 10,877
Transfers - 1,532 (1,532) -
Balance at 31 December 2018 14,571 68,877 4,703 88,151
Additions 1,535 14,083 1,022 16,640
Transfers - 4,800 (4,800) -
Balance at 31 December 2019 16,106 87,760 925 104,791
Accumulated amortization
Balance at 1 January 2018 (8,548) (46,704) - (55,252)
Charge for the period (1,064) (6,509) - (7,573)
Balance at 31 December 2018 (9,612) (53,213) - (62,825)
Charge for the period (1,421) (7,581) - (9,002)
Balance at 31 December 2019 (11,033) (60,794) - (71,827)
Net book value
As at 1 January 2018 3,446 15,925 2,651 22,022
As at 31 December 2018 4,959 15,664 4,703 25,326
As at 31 December 2019 5,073 26,966 925 32,964

58
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

22. Repossessed assets


Repossessed assets are acquired collaterals through enforcement of security over non-performing
loans and advances to customers. Repossessed assets comprise a number of properties including land
and buildings not earning income rentals or own used. During 2019, the Bank tested the related
properties for impairment and concluded that no impairment allowance was necessary (2018: nil).
The movement of repossessed assets item during the reporting period is presented as follows:

As at As at
31 December 2019 31 December 2018
At the beginning of the period 519,189 476,751
Additions during the period - 58,449
Disposals during the period (39,746) (16,011)
Total 479,443 519,189

Disposals represent properties sold by the Bank during 2019.

23. Other assets

As at As at
31 December 2019 31 December 2018
Prepaid taxes 64,475 48,721
Deferred expenses 4,761 5,441
Gold bullion 7,029 7,195
Other, net 47,214 (5,705)
Total 123,479 55,652

Prepaid taxes are composed of the following:


As at As at
31 December 2019 31 December 2018
Withholding tax 48,721 48,721
Prepaid income tax 15,754 -
Total 64,475 48,721

Prepaid withholding tax is related to interest income the Bank has generated in countries with which
the Republic of Albania has signed agreements for Avoidance of Double Taxation.

59
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

24. Due to banks and other financial institutions

As at As at
31 December 2019 31 December 2018

Payable on demand 24,298 16,045


Term deposits - -

Total 24,298 16,045

As at As at
31 December 2019 31 December 2018

In Albanian Lek 8,456 -


In foreign currency 15,842 16,045

Total 24,298 16,045

Due to banks are current accounts of local banks which are not rated.

25. Due to customers

As at As at
31 December 2019 31 December 2018
Retail customers 21,735,753 18,458,733
payable on demand 7,490,065 6,143,522
term deposits 14,245,688 12,315,211
Corporate customers 4,852,706 2,348,637
payable on demand 2,577,584 1,205,836
term deposits 2,005,364 1,023,396
other client accounts 269,758 119,405
Total 26,588,459 20,807,370

26. Repurchase Agreements


Bank did not have Repurchase Agreements as at 31 December 2019 (31 December 2018: 202,770
thousand).

60
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

27. Subordinated debts


On 11 January 2019, the general assembly of shareholders approved the issuance of subordinated
instruments in EUR to private individuals. As of 31 December 2019 the instruments are detailed as
follows.

Currency Units of instruments 31 December 2019 31 December 2018


EUR 200 245,495 -
Total 200 245,495 -

Units of As at As at
Tranches Issue date Maturity date Instruments 31 December 2019 31 December 2018
1 25 April 2019 25 April 2026 200 245,495 -
Total 200 245,495 -

61
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

28. Lease liabilities


The Bank has leases for the office buildings and main warehouse and related facilities. Each lease is
reflected on the balance sheet as a right-of-use asset and a lease liability.
The Bank classifies its right-of-use assets as a right of use asset on its balance sheet.

The table below describes the nature of the Bank’s leasing activities by type of right-of-use asset
recognised on balance sheet:
Number of
Number Number leases with Number
Number Range of Average of leases of leases variable of leases
of right of remaining remaining with with payment with
use assets Lease Lease extension option to linked to termination
Right of use asset leased Terms Terms options purchase an index options
2-19 10
Office buildings 17 years years 17 0 0 0
Warehouse & 2-10 3
related facilities 16 years years 16 0 0 0

The lease liabilities are secured by the related underlying assets. Future minimum lease payments at
31 December 2019 were as follows:

31 December 2019 Within 1 year 1-5 years After 5 years Total

Lease payments 85,438 306,667 773,791 1,165,896


Finance charges (23,481) (94,702) (91,207) (209,390)

Net present value 61,957 211,965 682,583 956,506

The changes in the Bank’s liabilities arising from financing activities can be classified as follows:

2019
31 December 2018 -
Adoption for IFRS 16 941,546
Revised 1 January 2019 941,546
Cash flows
Repayments (74,612)
Proceeds 89,572
Non cash
Fair values -
Reclassifications -
As at 31 December 2019 956,506

62
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

29. Other liabilities


As at As at
31 December 2019 31 December 2018
Payment in transit 238,148 70,593
Other creditors 130,387 26,502
Fiscal administration 14,901 14,602
Income tax payable - 16,237
Liabilities to personnel 5,101 1,728
Accruals for expenses 477 648
Suppliers 2,615 958
Total 391,629 131,268

30. Capital and reserves


Number and face value of registered shares
As at 31 December 2019 and 2018 the registered share capital of the Bank is Euro 11,974,576.26 or
ALL equivalent 1,516,517 thousand divided into 1,413,000 ordinary shares with par value each of Euro
8.47457626 or ALL 1,073.26.

31. Commitments and contingent liabilities


a) Memorandum items
The Bank provides financial guarantees and letters of credit to guarantee the performance of
customers to third parties. These agreements have fixed limits and generally extend for a period of
up to two years. The contractual amounts of commitments and contingent liabilities are set out in
the following table by category. The amounts reflected in the table for guarantees and letters of
credit represent the maximum accounting loss that would be recognized at the reporting date if each
counterpart failed completely to perform as contracted.
As at As at
31 December 2019 31 December 2018
Bank guarantees 55,084 96,784
Commitments given on behalf of customers 654,637 393,193
Letter of credit 19,673 -
Total 729,394 489,977

These commitments and contingent liabilities have off balance-sheet credit risk because only
organization fees and accruals for probable losses are recognized in the statement of financial
position until the commitments are fulfilled or expire. Many of the contingent liabilities and
commitments will expire without being advanced in whole or in part. Therefore, the amounts do not
represent expected future cash flows. As at the reporting date there are no significant commitments
and contingencies which require additional disclosure. At 31 December 2019 guarantees and letters
of credit are fully collateralized.

63
Notes to the financial statements for the year ended 31 December 2019
In thousands of ALL, unless otherwise stated

32. Related Parties


Parties are considered to be related if one party has the ability to control or exercise significant
influence over the other party on making financial or operational decisions, or the parties are
under common control. A number of banking transactions are entered into with the related party
First Investment Bank A.D. (Bulgaria) in the normal course of business. Such transactions include
loans, deposits and other transactions. The outstanding balances at the end of respective periods
are as follows:
As at and for the year ended
31 December 2019 31 December 2018
Loans and advances 1,606,870 994,239
Accounts receivables 8,513 8,599
Due to banks - -
Interest income 4,378 1,125
Interest expense (344) (180)
Commission income 435 612
Commission expense (227) (163)

The key management personnel of the Bank received remuneration of ALL 24,987 thousand (2018:
ALL 24,222 thousand) for the year ending 31 December 2019. Key management received other
benefits amounting ALL 7,583 thousand (2018: 8,615 thousand) for the year ending 31 December
2019.

33. Cash and cash equivalents

As at As at
31 December 2019 31 December 2018
Cash on hand (note 15) 701,345 470,924
Current accounts
central bank (note 15) 34,664 43,875
correspondent banks (note 18) 1,636,236 1,213,881
Loans and advances to banks
and financial institutions
with maturity less than 90 days (note 18) 1,643,761 1,234,251
Total 4,016,006 2,962,931

34. Subsequent events


The management of the Bank is not aware of any subsequent events that would require either
adjustments or additional disclosures in the financial statements.
THE Annual Report

62 FIBANK ALBANIA /2019

CONTACT US

Blvd. Dëshmorët e Kombit, Twin Towers,


kulla nr.2, kati 13/14/15, Tiranë, Shqipëri

(+355 4) 2276 702/3

[email protected]

www.fibank.al

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