Fearing financial instability, Albanians withdraw money from bank

Wed Mar 27,10:33 AM ET
By MERITA DHIMGJOKA, Associated Press Writer

TIRANA, Albania - Albanian officials stepped up efforts Wednesday to ensure thousands of depositors at the country's biggest bank that their money is safe in an attempt to halt a surge of withdrawals.

Bank customers with deposits in the Savings Bank — Albania's last state-owned bank, which is about to be privatized — have in recent weeks withdrawn their money. In interviews with Albanian media, several customers said they took the money out because they had heard a rumor from relatives in Greece saying the bank was about to go bankrupt.

The bank reported that its customers so far this month had withdrawn five times as much money as they did in February, despite bank officials assurances that deposits remain safe.

The withdrawals come at a time when lawmakers are discussing a draft law on deposit insurance that would require banks to get bankruptcy insurance for up to 700,000 leks (dlrs 5,000) in each account — meaning that more than 60 percent of the country's bank customers would have all of their deposits insured. Albania currently has no law specifying how much money banks must insure. Finance Minister Kastriot Islami said the draft law was "a further guarantee for the deposits in the banking system."

Albanian banks on average have bankruptcy insurance for 35 percent of their deposits, far above the internationally accepted level of 8 percent, said Shkelqim Cani, the governor of Albania's central bank. It was unclear whether the new law would affect the percentage level.

Most of the withdrawals were reported in two southern towns, Fier and Vlora, where many residents have relatives working in Greece and Italy. The area was also home to four large pyramid schemes that collapsed in 1997, plunging the country into anarchy. Tens of thousands of investors together lost about $ 1 billion.

Edvin Libohva, general manager of the Savings Bank, Wednesday traveled to Fier to meet with bank workers overwhelmed by the hundreds of customers lining up outside the bank to withdraw their money. He also reiterated that money deposited in the bank was safe.

A day earlier, he warned bank customers that their actions put the bank at risk. "If all depositors withdraw their money, the bank will be shut down, our employees will lose their jobs, and your money will be less worthy," Libohova said, also warning of a potential rise of inflation. Foreign banks wanting to buy the Savings Bank must submit their bids by April 17. Banks expressing interest so far include Zagrebacka Banka of Croatia, Italian Unicredito and the Bank of Austria. The government and central bank have said they tried to discourage Greek banks from bidding, as Greek banks already control four of Albania's 13 banks.