Factors that influence the NPL ratio in the Albanian Banking System

The global financial crisis of 2007, which affected almost all countries of the world, did not spare the Albanian financial system. Taking into consideration that our country's financial system is represented mainly by its banking system (about 85%) the analysis and the identification of problems of this system, caused by the global financial crisis, are obviously of a crucial importance. In this context, a very important indicator of the financial risks for banks is the credit risk which many researchers of the field consider to be related to the level of non-performing loans. In the banking system the non-performing loans appears in concerning levels and according to December 2013 estimate they amount to 23.86% of the total loans. This figure is a result of a gradual growth which has started since the last quarter of 2007 and still remains in the same high level. The high level of non-performing loans has forced banks to reduce the number of new loans causing a higher ratio between non-performing loans and the total loans. We must also say that this increased ratio is not only due to the reduction of loan portfolio but also caused by the rapid growth of non-performing loans.