The survey found that banks remained cautious in assessing high-risk business loans. However, they approved a larger number of loans, reflecting an improvement in the financial position of firms, particularly small and medium-sized enterprises (SMEs), as well as for short-term liquidity loans.

By contrast, banks took a more conservative approach toward individuals. During the quarter, they significantly tightened lending standards and conditions for households, especially for home purchase loans.

Banks also cited the new limits introduced in July by the Bank of Albania – on the loan-to-value (LTV) ratio and the debt service-to-income (DSTI) ratio for new real estate loans – as key factors behind the tightening of credit standards.

Under the new rules, commercial banks may not lend more than 85% of a home’s value for first-time buyers, and no more than 80% for second homes. Monthly installments must not exceed 40% of the borrower’s income for loans in local currency, and 35% for those in foreign currency.

Banks said these measures, combined with perceived collateral risks and uncertainty in the housing market, contributed to the further tightening of credit policies for individuals.

Looking ahead to the fourth quarter, the Bank of Albania expects overall lending policies for businesses to remain largely unchanged, with slight easing anticipated for SMEs. For individuals, lending standards are expected to tighten further, particularly for mortgage loans.

/a.f/r.e/u.sh/