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According to Article 16 of Law No.7491, dated April 29, 1991,
"On the main constitutional provisions" on the proposal
of the Council of Ministers,
THE PEOPLE'S ASSEMBLY OF THE REPUBLIC OF ALBANIA HAS
DECIDED:
CHAPTER
I
GENERAL
PROVISIONS
Article 1
Banks shall be independent financial institutions that take
all kinds of money deposits from physical and legal persons,
preserve their secrets, provide credit and execute other banking
activities recognized by law.
Article 2
The banking system in the Republic of Albania is organized on
two levels. The first level comprises the Bank of Albania, whose
status is defined by special law. The second level comprises
other banks.
Article 3
Banks shall be organized in one of the following forms:
a) state
banks, banks limited by shares, cooperative banks, private banks
with Albanian capital exclusively;
b) private
or state banks with Albanian and foreign capital;
c) private
banks with foreign capital exclusively.
The bank may be national or regional bank.
Article 4
A particular enterprise shall not be regarded as a bank if the
Bank of Albania shall have determined that its credit transactions
are limited and it obtains its funding from banks or other financial
institutions.
Article 5
The Banks have the right to open banking branches or offices
outside the territory of the country, if they are licensed by
the Bank of Albania.
With respect to enterprises whose head office is located outside
Republic of Albania and that are licensed to engage in banking
activities with one or more branch officies or agencies in Albania,
the provisions of this law shall apply only to the extent of
their business in Albania.
Article 6
No one shall engage in the banking activities described in Article
3 without a license and not in accordance with the provisions
of this law.
The foregoing prohibition shall not apply to enterprises regarded
as banks pursuant to Article 1.
Article 7
Enterprises other than institutions licensed to act as banks
pursuant to this law shall be prohibited from using the word
"Bank", or equivalent designations unless it is not
engaged in taking deposits from physical and legal persons and
extending credit or investing in financial market for third
parties.
The prohibition shall not apply to enterprises whose name is
recognized by law or international agreement of the State.
CHAPTER
II
LICENSING
Article 8
A license to operate as a bank may be obtained only upon written
application to the Bank of Albania in the form prescibed by
this Bank. The application shall include the proposed act of
registration as a legal entity, charter, the proposed location
of its head office and branches if any, as well as the nationality
and domicile of the founders of the bank. The application shall
be supported by a bussines plan for the first three years of
its activity. The license shall be granted by the Bank of Albania,
if :
a. it
shall be convinced for the adequacy of proposed capital funds
and other financial resources;
b. the
Board of Directors will consist of at least two persons, with
the qualifications and experience required for the
management of the bank;
c. the
banking activity will meet the needs of the proposed areas;
d. the
proposal will have positive effects on competition in the markets
to be served;
e. the
bank has the to become profitable in a reasonable period of
time;
f. the
bank guarantees to respect the law and regulations of the Bank
of Albania.
Article 9
1. Within ninety days from the date of the complete application
receipt, the application shall be approved or denied by the
Bank of Albania. The decision shall be communicated in
writing and it is irreversible. A denial decision shall include
an explanation of the legal grounds on which the application
was denied. The request may be resubmitted when the reasons
for refusal have been fulfilled.
2. The license to operate as a bank shall be granted for an
indefinite period of time and it is irreversible. In special
cases, the license may restrict or exclude the conduct of activities
with respect to which the Bank of Albania determines that they
require a special qualification.
Article 10
1. The given license may be revoked by the Bank of Albania if
it determines that:
a. the license has been obtained on the ground of false statements
contained in the application;
b. the bank fails to meet any of the conditions attached to
the license or any infraction as specified in Article 44 of
this law has been committed;
c. to the bank, whose head office is located abroad and that
has its branches and offices in Albania, the license is revoked
by the respective country;
d. the owner or owners of the bank have decided to dissolve
or liquidate the institution;
e. the bank has ceased to exist as a legally independent
entity following its dissolution, liquidation, merger, amalgamation,
division or absorption.
2. The decision to revoke a license shall be
communicated in writing to the bank concerned and it is irrevocable.
Article 11
A bank may request the Bank of Albania in writing to revoke its
license to operate as a bank. Within ninety days after its
receipt of the request, the Bank of Albania shall decide on the
request. The decision shall be communicated in writing to
the bank, giving, in the event of a denial, the grounds therefor.
Article 12
All licenses and decisions to revoke a license shall be published
in the Official Gazette of the Republic of Albania. Following
publication of the decision to revoke a license, the enterprise
concerned shall be prohibited from attrating financial resources
from the public and extending credit. Within a period of time
determined by the Bank of Albania, the bank shall liquidate its
assets, terminate its current deposit agreements and discharge
its liabilities.
Article 13
The Bank of Albania shall keep a register recording the name,
head office and address of the currently licensed banks.
The Bank whose license has been revoked shall be removed from
the register.
Copies of the register shall be available for inspection by the
public.
Article 14
Representative offices of financial institutions domiciled abroad
or their branches in Albania shall not take money deposits from
the albanian legal and physical persons. The financial institutions
domiciled abroad without licenses to operate in Albania shall
not take money deposits directly or through agents.
CHAPTER III
ADMINISTRATION
AND OWNERSHIP
Article 15
Banks shall be administered by a Board of Directors, which shall
be a decision-making organ. They shall have a Audit Committe
and be supervised by the Board of Supervisors.
The Bank may choose not to have a Board of Supervisors if Banks
are not required by another law to have such Board.
For the purposes of this law, the members of the above Organs
and the Directors of departments shall be called Administrators.
Article 16
1. No amendment of the licenses given shall take effect without
the prior written consent of the Bank of Albania.
2. All banks shall be governed by internal by-laws, which are
composed in accordance with the license granted.
3. The by-laws of banks shall be approved by the Board of Directors.
The certified copy of the by-laws shall be filed with the Bank
of Albania.
4. Each bank shall maintain on file with the Bank of Albania,
and in the Court for each jurisdiction where it maintains an office,
a duly certified copy of its license and charter, and a list of
the bank officials, a description of their authorities and together
with their specimen signatures.
Article 17
The Board of Directors, Board of Supervisiors and Audit Committe
authorities shall be set forth by law and by charter.
Article 18
The Board of Directors and the Board of Supervisors shall have
at least two members.
Article 19
1. The Audit Committee shall consist of three members appointed
by the shareholders or owners of the bank and shall have the following
duties
a. shall
establish and supervise the appropriate accounting procedures
for the bank, and audit the bank's accounts and records;
b. shall
monitore the implementation of the regulations and report to the
Board of Directors of the Bank;
c. shall
deliver opinions on any matters submitted to it by the Board of
Directors.
2. The Audit Committee shall meet ordinarily once per quarter
and extraordinarily when convened by the Board of Directors.
Decisions shall be taken by a majority of the members present.
No abstentions shall be allowed.
3. Upon its request the Audit Committee may be assisted by experts
appointed by the Board of Directors of the bank.
Article 20
All persons elected or appointed as Administrators of a bank shall
meet the requirements established by the Bank of Albania regarding
qualifications, experience, and reputation.
Article 21
The establishment of a bank branch, office, or agency shall be
subject to the Bank of Albania policy.
Article 22
To have legal effect, the merger, amalgamation, division or absorbtion
of a bank shall require the prior authorization of the Bank of
Albania. Approval of such merger, amalgamation, division or absorbtion
shall be granted only if shall be granted a license to operate
as a bank.
Article 23
The minimum amount of unimpaired capital, minimum fund of reserves
and profits share that shall contribute in their increase shall
be determined by the Bank of Albania according to the class of
such banks. The structure of the unimpaired capital, reserve funds
and profits shall be determined by the Bank of Albania.
Article 24
To have legal effect, the transfer, in one or more transactions,
by a person or number of persons acting in concert, of an equity
interest representing in the aggregate more than 15 percent of
the subscribed capital stock of a bank shall require the prior
written authorization of the Bank of Albania.
CHAPTER IV
OPERATIONAL
REQUIREMENTS
Article 25
a. shall
establish and supervise the appropriate accounting procedures
for the bank, and audit the bank's accounts and records;
b. shall
monitore the implementation of the regulations and report to the
Board of Directors of the Bank;
c. shall
deliver opinions on any matters submitted to it by the Board of
Directors.
2. The Audit Committee shall meet ordinarily once per quarter
and extraordinarily when convened by the Board of Directors.
Decisions shall be taken by a majority of the members present.
No abstentions shall be allowed.
3. Upon its request the Audit Committee may be assisted by experts
appointed by the Board of Directors of the bank.
Article 20
All persons elected or appointed as Administrators of a bank shall
meet the requirements established by the Bank of Albania regarding
qualifications, experience, and good reputation.
Article 21
The establishment of a bank branch, office, or agency shall be
subject to the Bank of Albania policy.
Article 22
To have legal effect, the merger, amalgamation, division or absorbtion
of a bank shall require the prior authorization of the Bank of
Albania.
In carrying out credit transactions, banks shall comply with the
principles of risk avoidance, diversification, and liquidity,
as well as with the directives and instructions issued by the
Bank of Albania.
Article 26
1. Banks shall keep on file the pertinent legal documents for
every credit transaction, namely:
a. the
credit application, the documents which indicate its use, legal
status and the value assigned to the collateral or guarantees
required and provided.
b. the
financial records of the customer and any guarantors which shall
serve as the basis for approving the credit transactions.
c. the
decision of the department and respective director approving the
credit transactions signed by responsible persons. In the case
of a decision by the Board of Directors, a copy of the meeting
minutes at which the credit
transaction was approved, must be extracted.
2. The Bank of Albania shall have the right to request further
documents and procedures other than conditions determined in point
1 of this Article. Only the Bank of Albania may permit simplified
documentation for credit transaction involving small amounts,
discount or pledge of commercial paper. These shall be approved
by the managers of branches, agencies, and other such officies
of banks within the limits of their authorities.
Article 27
Banks shall be ohliged to observe the following limits determined
by the Bank of Albania:
a. the
maximum ratios to be maintained by banks between their assets,
risk-weighted assets and off-balance sheet items and their unimpaired
capital, reserves and surplus;
b. the
maximum aggregate credit amount, expressed as a percentage of
their unimpaired capital, reserves and surplus, that banks shall
be permitted to extend to any single or interrelated borrowers;
c. the
maximum aggregate credit amount, expressed as a percentage of
the aggregate amount of credits disbursed and outstanding, that
banks shall be permitted to extend to their ten largest borrowers,
including groups of
interrelated borrowers.
Article 28
Banks shall be obliged to observe the following requirements determined
by the Bank of Albania concerning:
a. the
minimum size of liquid resourses or specific categories of such
resourses in relation to the size or change in size of assets,
guarantees or their specific categories thereof, or in relation
to the size or change in size of liabilities or their specific
categories, provided that the bank shall be permitted to meet
the requirement of liquid resources by maintaining with the Bank
of Albania deposits of an equivalent value;
b. the
maximum aggregate amount of credits, financial investments and
guarantees, or specific categories thereof;
c. requirements,
prescribed under the force of exceptional circumstances, concerning
the interest rates and other charges to be paid by a bank, as
well as the requirements concerning the maturity and other conditions,
applicable to deposits, guarantees and other liabilities, denominated
in lek or in foreign currency;
d. requirements,
prescribed under the force of exceptional circumstances, concerning
the interest rates, maturity and other conditions applicable to
any type or form of increase or decrease of financing, or contingent
liabilities entered into;
e. the
amounts to be reserved against doubtful and non-performing
loans. Earnings may be calculated beginning from the date when
these loans shall be received in cash;
f. the
banks must respect prohibitions, restrictions and conditions concerning:
(i) the types or forms of credits and investments made or contingent
liabilities entered into;
(ii) the control of assets and liabilities maturity and offbalance
sheet items; and
(iii) unhedged foreign currency positions.
Article 29
Each bank shall regularly notify its customers of the terms and
conditions of annual interest rates, related to deposits, credit
application and their changes, including the calculation method
used.
Article 30
Banks shall not, without prior written authorization from the
Bank of Albania:
a. issue
or sell securities either in or outside the territory of the Republic
of Albania;
b. decrease
their capital by repurchase of shares or distribution of reserve
assets;
c. purchase
shares or become a partner in aggregate amounts to more than ten
percent of the enterprise capital, or come under common ownership,
or otherwise become associated with other enterprises other than
banks or such similar institutions as the Bank of Albania shall
designate; and
d. permit
the investments described under paragraph c, to exceed the equivalent
of 25 percent of the bank's unimpaired capital, reserves and surplus.
Article 31
1. The prohibitions specified in article 30 shall not apply in
the following cases:
a. acquisition
of shares or other interests by way of repayment of credits granted.
In this case the purchasing bank shall dispose of all shares or
interests acquired within one year, unless a loan extension is
granted by the Bank of Albania;
b. acquitision
of shares or other interests as an agent;
c. acquisition
of shares for the purpose of reselling them to third parties.
2. Banks shall be prohibited from entering into contracts, agreements
or adopting practices of any kind which would secure them a position
of dominance on the money, financial or foreign exchange markets.
Engaging in manipulative practices in order to obtain an unfair
advantage for themselves or for third parties shall be prohibited.
CHAPTER V
BUSINESS WITH
PERSONS RELATED TO THE BANK
Article 32
1. Banks may conduct business with related persons in accordance
with the provisions of this law.
For the purposes of this law, the term "related person"
shall mean:
a. any
of the Administrators specified in the article 15 of this law;
b. any
company controlling the bank or any of the Administrators and
principal shareholders of such company;
c. the
spouse or any relative, up to the third degree of consanguinity,
of any of the bank Administrators or of any of the
principal Administrators of a company controlling the bank;
d. any
company in which any one of the persons referred to above has
a direct or indirect equity interest exceeding 10 percent of their
subscribed capital stock;
e. any
of the principal shareholders of the bank and any company under
their direct or indirect control;
f. legal
entities or civil person controlling a bank, and their Administrators,
as well as any legal entity directly or indirectly controlled
by them, and its Administrators.
g. related
persons with respect to any of the financial institutions making
up a group of interrelated financial institutions shall beconsidered
related persons with respect to each of the institutions in the
group.
Article 33
2. For the purposes of the Article 32:
a. "principal
shareholder" means the beneficial owner of more than 10 percent
equity interest in the subscribed capital stock of an enterprise;
b. "control"
with respect to a company or financial institution means:
- owing more than fifty percent of shares;
- having the power to elect a majority of the company directors;
- having a controlling influence over the establishment of the
policy management of a company or institution.
Article 34
Banks shall not grant favored terms to related persons.
For the purposes of this Article, "granting favored terms"
shall mean:
a. transactions,
which by their nature, purpose, and risk that they have, would
not be effected to other customers, but to related persons;
b. collecting
interest, fees, other charges and accepting guarantees which are
lower than those of other customers.
Article 35
Banks shall extend credit to related persons as defined in Article
32 of this law, if so authorized by their Board of directors based
on a report of the respective department. The above report shall
describe the relationships of the related person involved concerning
the transaction that will be effected, the financial situation
of the applicant and an assessment of the applicant's creditworthiness.
Members of the Board of Directors shall be required to leave the
meeting during the time in which the Board is deliberating and
deciding on the transactions of another person, with whom the
member of the Board is related by marriage, blood, kinship or
profit interest.
The aggregate amount of credit extended by a bank to any one of
its employees shall not exceed 24 times his gross monthly salary.
The aggregate amount of credit extended by a bank to its employees
shall not exceed 10 percent of the bank's subscribed capital stock.
CHAPTER VI
ACCOUNTS,
AUDITING, INSPECTION, AND REPORTING REQUIREMENTS
Article 36
Banks shall keep adequate accounts and prepare financial statements,
to reflect accurately and in accordance with sound accounting
principle, its financial condition. In the event that the bank
will have an equity interest in one or more other banks equivalent
to more than fifty percent of its subscribed capital stock, the
bank shall keep the necessary accounts and shall prepare financial
statements so as to accurately reflect the financial condition
of such other banks, in accordance with standart accounting principles
and methodology.
Article 37
An independent auditor approved by the Bank of Albania shall be
appointed by each bank. The auditer shall have the following duties:
a. to assist
in keeping adequate accounts and records of its operations and
transactions in accordance with sound accounting principles;
b. to prepare,
in accordance with respective regulations, an annual report on
the financial statements (balance sheet, profit and
loss account and related statements) of the bank, and to deliver
on opinion as to whether the financial statements are adequately
reflect the financial position of he bank;
c. to inform
the Board of Directors, Board of Supervisors and the Bank of Albania
of any irregularities or deficiences observed in the operations,
transactions, procedures, records or accounts of the bank which
could
result in material losses for the bank.
Article 38
The balance sheet of the bank, the annual report and the auditer's
report for the financial year shall be published in the official
bulletin of the bank.
Article 39
All banks shall be subjects to inspections by Bank of Albania
inspectors and by auditor appointed by it. In their inspections
of banks, the Bank of Albania and its auditers may:
a. examine
the accounts and related documentation, the corporate books, and
any other document in the archives of the bank; and
b. require
Administrators, employees and agents of the bank to provide all
such information on any matter relating to its administration
and operations as they shall request.
Article 40
The provisions of Articles 38 through 39 of this law shall apply
to banks that are branch offices of foreign financial institutions
or the branch officies of separate legal entities. Balance sheets
and financial statements of these branches may be prepared on
a pro forma basis, in accordance with the charter and by-laws
of the bank.
A representative organ of the foreign financial institution may
function as an Audit Committee of these branch offices for the
implementation of this law.
Article 41
Banks shall prepare periodic reports providing information on
their administration and operations, liquidity and profits in
accordance with the regulations determined by the Bank of Albania.
CHAPTER VII
INFRACTIONS
AND PENALTIES
Article 42
The Administrators of the Bank of Albania, for the infractions
of regulations specified in the Article 10 paragraph "a",
Articles 26, 27, 28, 29, 30, 31 paragraphs two and three, Articles
34, 35 - last paragraph, 36 and 41 of this law, if these infractions
do not constitute a penal act, may punish the banks or their Administrators
with a fine of up to 5000 leks for administrative infractions.
An appeal in set form may be made against the punishment decision,
within five days from its declaration or communication, to the
Governor of the Bank of Albania, whom decision is irreversible.
Article 43
In the event that the provisions of this law are fractioned by
banks or their Administrators, the Bank of Albania shall regulate
the situation, taking the following measures:
a) issue
written warnings concerning restraining various bank activities,
including revoking the license;
b) specify
that the bank should undertake remedial measures including those
limiting the operations of the bank;
c) issue
written orders to cease and desist from such infractions;
d) call
a meeting of the Council of Shareholders or other owners of the
bank to discuss the remedial measures to be taken;
e) order
conservatorship of the bank, through persons authorized by it,
that shall operate in accordance with the provisions of this law;
f) revoke
the bank's license.
Article 44
The administrative penalties and measures provided in the Articles
42 and 43 of this law shall not preclude application of civil
or criminal penalties as provided in legislation in force. Penalties
shall applied in accordance with the seriousness of the offense
and its impact. These penalties shall eaqually apply to any individual
or legal entity which engage itself, without a license, in banking
activities.
Article 45
The fines imposed shall be paid to the state budget.
CHAPTER X
CONSERVATORSHIP
AND LIQUIDATION
Article 46
In the event that the financial position of a bank is such that
it is not in compliance with the minimum requirements of its activity
pursuant to this law, the bank may, by decision of the Bank of
Albania, be placed under conservatorship in order to preseve,
remedy or resolve the bank's financial position.
Article 47
The decision ordering conservatorship shall indicate:
a. the
reasons of the conservatorship;
b. the
name of the conservator appointed, who may or may not be an official
of the Bank of Albania;
c. conservatorship
for a period of not more than six months;
d. funds;
and the possible freezing of deposits or other customer
e. the
sequestration of the personal assets of the Administrators of
the bank, in the event they have personal liability for losses
of the bank, in order to guarantee the payment of possible losses
to third parties.
A decision of this kind goes into force on the date of its
publication in the Official Gazette.
Article 48
Acts issued by the bank under conservatorship shall be consider
unvalid if the conservator otherwise decides.
Article 49
During the conservatorship duration under the paragraph "c"
of Article 47, shall be suspended the activity of Administrators
of the bank. They shall return to their previous duties only if
they are not disqualified by the Bank of Albania.
Article 50
The conservator shall require the prompt changes in the lists
of authorized officials of the bank that are kept by the Bank
of Albania and by the district Court for the jurisdiction where
the head office of the bank is located.
Article 51
The conservator appointed by the Bank of Albania shall be authorized
to adopt any measure required to normalize the situation of the
bank, including the closure of branches, agencies and other such
offices and the dismissal of Administrators and employees deemed
by him to be redundant or unfit to perform their duties.
Article 52
During the period of conservatorship, the Bank of Albania may
provide financial support to the bank under conditions determined
by it in order to make up any temporary liquidity deficiency.
Article 53
If the Bank of Albania deems the rehabilitation of the bank under
conservatorship to be more costly than its dissolution it shall
declare the bank insolvent and liquidate it.
Article 54
Claims resulting from advances of funds by the Bank of Albania
to the bank during its conservatorship shall have priority over
all other claims on the bank.
Article 55
The conservatorship shall cease:
a. at the
end of the term established in the decision ordering conservatorship
or
at the end of an extension of that term by decision of the Bank
of
Albania published in the Official Gazette;
b. if the
Bank of Albania deems that the bank can operate normally; or
c. upon
liquidation of the bank in accordance with the law.
CHAPTER XI
FINAL PROVISIONS
Article 56
The employees of the bank and other persons that will be charged
to control the banking activity shall be required to keep the
secret of any information that they obtain in the course of their
service in the bank. Such information may be disclosed only to
administrators of the bank or, upon the written request, to court,
and judicial authorities under procedures provided by law.
Article 57
Banks shall have a emblem and its seal showing the distinct symbols.
Article 58
Banks of the second level shall pay a profit tax and other taxes
at the level set by the law.
Article 59
Institutions that operate as a bank at the time that this law
enters into force, shall be deemed to be licensed to operate as
bank.
Article 60
All regulations, guidelines and orders issued by the Bank of Albania
that apply to more than one institution shall be published in
the Official Gazette and shall take effect on the date of such
publication or on the date as such regulation, guidelines or order
shall specify.
Article 61
Decree No.7493, dated December 1, 1990 "Concerning the Albanian
Commercial Bank" and law No.7505, dated July 31, 1991 "Concerning
the Savings Bank" are rescinded.
Article 62
This law shall enter into force immediately.
Tirana on April 28, 1992
Law No.7560
Chairman
Pjeter Arbnori
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