Page 121 - Annual Report 2023

ANNUAL REPORT 2023 52
Notes to the Consolidated Financial Statements for the year ended 31 December 2023
(amounts in USD, unless otherwise stated)

Exposure to liquidity risk
One of the key ratios used by the Bank for managing liquidity risk, which is required by Bank of Albania (BoA) at the same time, is the
ratio of total liquid assets to total short-term liabilities on a daily basis. Based on the regulation No.71 dated 14.10.2009 “Liquidity risk
management policy” the total liquidity ratio should be at a minimum of 20%, whereas the minimum of individual ratios for local and
foreign currencies (FX) should be at respectively 15% and 20%.
As per this regulation, article 19 point 4, liquid assets are considered: cash balance, current accounts with BoA including mandatory
reserve, T-bills and securities according to their remaining maturity and ability to turn into liquidity, where the non-resident counterparties’
balances are discounted with the respective haircuts according to international credit rating. Short-term liabilities are considered all
liabilities with remaining maturity up to one year.
Details of the reported Bank ratio at the reporting dates were as follows:
31-Dec-2023 31-Dec-2022
Total Liquid Assets/Total Short Term Liabilities Ratio 40.59% 40.38%
Liquid Assets in local currency/Short Term Liabilities in local currency Ratio 67.36% 62.56%
Liquid Assets in foreign currency/Short Term Liabilities in foreign currency Ratio 25.06% 27.39%

(d) Market risk
1) Foreign currency risk
Foreign currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates. The Bank
manages this risk by establishing and monitoring limits on open positions and also ensuring that these positions remain in compliance
with the Bank of Albania guidelines and Bank’s internal operational covenants. The Bank has in place procedures for the independent
checking of open foreign currency positions.

The following tables present the USD equivalent amounts of monetary assets and liabilities by currency as at 31 December 2023 and
31 December 2022:
31 December 2023 Lek USD Euro Other Total
Assets (In USD equivalent)
Cash and balances with Central Bank 215,431,044 24,375,937 406,289,022 30,709,200 676,805,203
Placements and balances with banks 485,883 68,000,574 253,398,411 20,577,452 342,462,320
Investment securities 1,277,530,509 512,564,120 1,538,773,083 87,379,652 3,416,247,364
Loans to banks - 26,580,192 108,250,346 - 134,830,538
Loans to customers 634,721,230 55,180,360 1,004,127,394 - 1,694,028,984
Other assets 4,650,423 (215,733) 5,234,531 32,746 9,701,967
Total assets 2,132,819,089 686,485,450 3,316,072,787 138,699,050 6,274,076,376
Foreign exchange contracts 10,755,269 10,159,265 107,121,779 456,741 128,493,054
Liabilities
Customer deposits 1,997,932,572 219,203,721 3,161,459,029 100,418,745 5,479,014,067
Due to banks and financial institutions 104,625,687 9,512,103 41,915,154 3,371,093 159,424,037
Due to third parties 8,134,168 - 4,678 - 8,138,846
Accruals and other liabilities 7,106,428 4,879,651 4,462,038 109,205 16,557,322
Lease liabilities 741,391 164,301 13,277,116 - 14,182,808
Debt securities issued - - 34,072,463 - 34,072,463
Subordinated debt - - 52,182,032 - 52,182,032
Total liabilities 2,118,540,246 233,759,776 3,307,372,510 103,899,043 5,763,571,575
Foreign exchange contracts 497,711 74,208,130 20,111,236 33,675,977 128,493,054
Net position (GAP) 28,383,563 388,676,809 95,710,820 1,580,772 514,351,964

Total assets / Total liabilities 101.34% 226.21% 102.88% 101.15% 108.73%
GAP / FX denominated assets 0.56 0.028 0.0114 0.08

Sensitivity analysis
Lek depreciates by 10% 35,334,255 8,700,984 143,706 44,178,945
Lek depreciates by 5% 18,508,419 4,557,658 75,275 23,141,352
Lek appreciates by 5% (20,456,674) (5,037,412) (83,198) (25,577,284)
Lek appreciates by 10% (43,186,312) (10,634,536) (175,641) (53,996,489)