European union – albania stabilisation and association committee 11 March 2015 table of contents political criteria 3
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On administrative capacities, trainings were carried out in the area of right of establishment and free movement of services in June-December 2015 and were focused on:
The approach developed in these trainings will be used in the coming trainings, focusing in particular on the methodology and the questionnaire completion. These trainings will be carried out at the start of the screening process for the three abovementioned sectors (tax services, social and legal services). Online training is provided by the Albanian School of Public Administration. The on-line training has two modules, elaborating:
These training materials are available at ASPA’s webpage (www.aspa.gov.al). Use of this exercise will be advocated. On Postal services, in 2014, a new draft law on postal services in the Republic of Albania was prepared aiming to transpose the EU acquis on postal services, i.e. which fully transpose the Directive 97/67/EC of the European Parliament and of the Council of 15 December 1997 on common rules for the development of the internal market of Community postal services and the improvement of quality of service, and Directive 2002/39/EC of the European Parliament and of the Council of 10 June 2002 amending Directive 97/67/EC with regard to the further opening to competition of Community postal services, and partially transpose the Directive 2008/6/EC of the European Parliament and of the Council of 20 February 2008 amending Directive 97/67/EC with regard to the full accomplishment of the internal market of Community postal services. Representatives of Albanian Electronic and Postal Communications Authority (AKEP) were part of the working groups tasked with the preparation of this draft law. A public consultation process on the draft law was organised in July – September 2014. In addition, the draft law was published at the website of the Minister of Innovation and Public Administration23. Stakeholders and interested parties could send their comments directly to the office of the Minister. At the end of the consultation process, a round table was organised by the Minister for Innovation and Public Administration on 23 September 2014, in Tirana, with market players and AKEP to discuss on draft law and on the feedback received during the consultation process. The legal procedures for the endorsement of the draft law by the Council of Ministers started in November 2014 and currently is pending endorsement at the Council of Ministers. In following will be submitted to the Parliament for adoption. Concerning institutional capacities, AKEP in implementation of the Decision of the Parliament No 11/2014 of 20.02.2014 “On approval of the structure, organigramme, and classification of the work positions of the Electronic and Postal Communications Authority (AKEP)”, finalised its restructuring on 13.06.2014, which included the set up of a separate unit under the Directorate of Market Surveillance, Tariffs and Postal Service, tasked to regulate the postal sector in Albania. In October 2014, AKEP started the procurement procedures for the reconstruction of its offices in Tirana. AKEP is planning to use 49,378,000 ALL without VAT (approximately Euro 352,000) of its own funds for this reconstruction. 5.3.2 Regulated Professions Regarding regulated professions, the Ministry of Education and Sport is working to implement the obligations of Directive 2013/55/EU amending Directive 2005/36/EC on the recognition of professional qualifications. Law No 90/2014 of 17.07 2014 “On an addenda to Law No 10171 of 22.10.2009 “On regulated professions in the Republic of Albania” was approved. This amendment adds two new professions, social worker and psychologist to the current list of ten regulated professions24. With the new changes of the law, also candidates which exercising these two professions will be subject to state exams organized by National Exams Agency (NEA) prior to exercising their profession. During January 2015, the Seventh session of exams was organized for the following regulated professions: nurse, imager, physiotherapist, midwife, logopedy, Lab technician. In total 1,192 candidates participated in these exams. The distribution by profile is Physiotherapy (48 candidates), imagery (31 candidates), nurse (961 candidates), midwife (96 candidates), logopedy (4 candidates) and lab technician (52 candidates). During the period April-July 2014, were organized state exams for the following professions: doctor of medicine, pharmacist, dental practitioner, logoped, lab technician, imager and physiotherapist. In total 213 candidates were registered for those exams and 82% of them have participated in respective exams. Overall success rate is 55%. In July 2014 teachers state exams took place for about 1,091 candidates registered at RED/EO for the following profiles: English Language, Italian Language, French Language, German Language, Albanian Language and literature, social sciences, history, geography, history-geography, mathematics, physics, mathematic-physics, informatics, mathematic-informatics, chemistry, biology, biology-chemistry, physical education, figurative Arts, music, basic education, history-geography citizenship. From the total of registered candidates only 898 of them participated in state exams (nation-wide), 59.35% of which (or 533 candidates) were qualified as successful in state exams for the profiles of teaching. On institutional and administrative capacity, the National Examination Agency (NEA) has qualified and trained the staff of evaluation directorates aiming to increase their expertise. Moreover, trainings were organized by well-known international institutions regarding improvement of expertise in the area of standardized evaluation and national exams. 5.4 Company Law, Accounting and Auditing 5.4.1. Company law Regarding legislative alignment, during 2014, the Law No 129/2014 of 2.10.2014 “On some amendments to Law No 9901 of 14.04.20008 ‘On Entrepreneurs and Companies” was adopted. The amendments entered into force on 7.11.2014. Corporate Governance Code (CGC) was prepared and made available to businesses in 2011. Considering the assessment of the implementation of the CGC by companies as crucial to the improvement of their internal capacities, the Ministry of Economic Development, Tourism, Trade and Entrepreneurship (MEDTTE) started in 2014 the evaluation process, to assess the implementation and impact of this Code to businesses. MEDTTE in cooperation with Corporate Governance Institute and GIZ organised on 15.10.2014 a workshop aiming to raise awareness on the benefits of the CGC. An assessment questionnaire was made available to businesses through the National Registration Centre. 33 questionnaires are collected with NRC support. As the number of questionnaire was not representative, with the support of the Institute of Corporate Governance and GIZ, around 100 questionnaires are filled in through face to face meetings. The report on the implementation of CGC is at the final drafting stage. The National Authority for Electronic Certification (NAEC) is the responsible institution for the implementation of Law No 9880 of 25.02.2008 “On electronic signatures” and Decision of Council of Ministers No 525 of 13.15.2009 “On the approval of the Regulation on Electronic Signature,” as well as Technical Specifications adopted by the European Telecommunications Standards Institute, and other related international standards, which are mandatory to be fulfilled by a qualified Certification Service Provider (CSP). The main adopted standards include ISO/IEC 15408, ETSI 101 456, ISO IEC 27001, FIPS 140-1 and 140-2, or their respective equivalents. Operational procedures and the secure signature – creation devices must fulfil the security criteria according to EU requirements, EAL 3+ or E2. All CSPs and Assessment Bodies operating in the Republic of Albania are required to be registered/accredited and audited by NAEC. The register containing these subjects, is published in the official website of NAEC (http://www.akce.gov.al/al/regjistri), together with links to all issued certificates, revoked certificates, etc. Two CSPs are currently accredited: a) The National Agency for Information Society (NAIS), as stipulated in the Decision of the Council of Ministers No 703 of 29.10.2014 “On the National Agency for Information Society” offers these services free of charge to all public bodies/ employees. NAIS has established and administers the government public key infrastructure (PKI)25. Currently NAIS has issued certificates to: Council of Ministers, Ministry of Economic Development, Trade and Entrepreneurship, National Agency for Information Society (NAIS), National Registration Centre (NRC), National Authority for Electronic Certification (NAEC) and three municipalities; b)ALEAT Ltd, offers these service to the private sector. Electronic Identification is currently possible, while the service of electronic signature is scheduled to be fully operational by the first quarter of 2015. Authentication and Qualified Signature Certificates are stored inside the new National ID Card, issued after February 2014. Both issuance and usage of these certificates is voluntary. All citizens that have an ID card issued prior to January 2014 can get the certificates free of charge from ALEAT Ltd. According to ALEAT Ltd, 139,612 electronic certificates were issued until the end of 2014 in the ID cards, and 3,740 certificates were revoked. No statistics are available to differentiate if the citizens use the certificates as natural persons or as businesses, because they can use it for both purposes. The only public institution that currently offers services towards citizens and other legal entities via the electronic signature is the National Registration Centre. In 2014, NRC issued 1,548 abstracts on business entities and 1,800 de-registration certificates, with electronic signature (as certified from NAIS). The authentication is currently in progress and being integrated with the Login functionalities of the e-Albania Portal and for the National Registration Canter ’ s application, to obtain a company extract and to apply for a new business entity. NRC has built the necessary infrastructure to allow e-registration. Based on the Law No 9723 of 3.05.2007 “On National Registration Centre”, as amended the annual balance sheet and the audit report will be should submitted online. These requirements are in accordance with the provisions of the legislation on accounting and financial statements of commercial subjects and freely accessible to the public through the official website of the NRC. 5.4.2. Accounting and Auditing In 2014, NACA improved the version of National Accounting Standards in concordance with International Financial Reporting Standards for Small and Medium Entities. The Order of Minister of Finances No 64, entered in force on 22.07.2014. The effective date of the standards implementation is 1 January 2015. The NACA is developing a project in setting a national accounting standard for non profit entities, which is expected to be concluded by the end of 2015. In order to discuss the project with third parties in the second half of 2015, seven round tables are planned: four in Tirana and three in other cities. NACA has decided to amend the law of accounting and financial statements aligning it with the EU Directive 2013/34. NACA has completed using TRADOS translation software, the translation, review and consolidation of NAS/IAS (2013 version) in Albanian. The translation, review and consolidation of NAS/IAS 2014, is still in process. Regarding Auditing, under the outputs of the component 1 of CFREP project, a very first draft for revision of the existing Law No 10091 of 5.03.2009 on the audit is prepared. The main concern is the independence of the public oversight system in Albania, considering its composition, and its human and financial resources. However, there is still discussion with the Ministry of Finance. The strengthening of NACA capacities was made possible by the REPARIS Programme, through “Corporate Financial Reporting Enhancement Project”, component 2, “Strengthening the capacities of National Accounting Council”. Regarding independence of the public oversight system in Albania, some amendments are planned in the existing Law No 10091 of 5.03.2009 on the audit (a very first draft is prepared) in which the main concern in is to archive the POB’s independence. On Territorial Planning and Development as contribution for Point 6.4 Internal Market and Competition: In July 2014, the law 107/2014 “on Territorial Planning and Development” was approved and entered into force on 01/10/2014. This law clarifies the situation on territorial planning by creating a hierarchy of planning documents, their type as well as the authorities that have competences on territorial planning. Also, the law clarifies the issues with construction and development permits as well as the institutions that approve them. Regarding planning documents they are drafted at national and local level and are divided into general and sectorial plans. They aim at the sustainable development of the territory as well as try to harmonise and coordinate the different vertical and horizontal interests. Regarding territorial development, the construction permits are divided into complex permits which are used for major projects and approved at the National Territory Council, as well as construction permits which are approved at local level. In addition, a new component has been added with an easier procedure, for some interventions which do not have the intention for adding new spaces and volumes but are primarily for issues of maintenance and substitution, which is called the declaration of works. In support of law 107/2014, different bylaws are being drafted for the rules on territorial planning and territorial development which will help in making the law completely functional. These two regulation are predicted to be completed within a very short time period (end of March). The Ministry of Urban Development has also started the procedure on drafting the technical norms for construction. This is a very important step in improving the legal basis as well as in the control of development. In support of economic development, and in order not to hinder investments in important economic sectors, MUD in collaboration with the National Territory Planning Agency and the NTC has set out a number of NTC decisions which help in unlocking the situation with building permits in a situation where territorial plans are absent. Through the NTC decision, nr 1, date 22/08/2014 and nr. 5, of 29/12/2014, development is now allow within the confines of the urbanised areas from the study of the NTPA. Development in permitted for individual primary dwellings, industrial development, economic issues, tourism, public infrastructure etc. In order to support this process, the NTPA serves as a one stop shop service, and does the control of the compatibility for the applications. These interventions will help in solving the issue of building permits for the transitory phase due to the drafting of the national plan and the plans for the new local authorities. MUD in collaboration with ALUIZNI is engaged in legalizing informal settlements. This will bring a considerable amount of building into the formal sector allowing for economic gains from the public, private and citizens. In addition, MUD, is drafting a series of sectors with regard to the integration of informal areas with current urban zones. The integration is not only seen in the physical context, but also from an economic and social perspective. The Ministry of Urban Development is drafting three important plans of national importance such as:
These plans, aim at fostering economic development, social development, conserving the environment and harmonising sectoral, national and local interests. The three plans are aimed to be completed by 2015. In the end, these plans will serve as a framework for the newly formed local governments for drafting their territorial plans. MUD in collaboration with the NTPA, has drafted a series of international competitions on urban design, with the aim of creating new models for urban development in Albania. Three are the main competitions which have not only been drafted as projects but also started to some extent their implementation, the Vlora Waterfront, the Riviera and Durana. In collaboration with the Albanian Development Fund, ADF, a programme for Regional Development has been set. This program funds projects that aim at improving the quality of urban centres. In addition, the sector of land administration has started the process of drafting the policy document on this issue. This document will serve as a general framework for increasing transparency on land transactions, as well as to guarantee a more stable system for its administration and management. Update on the screening process for the transposition of the Services Directive. Coordination of the work at inter-ministerial level Coordination of work at inter-ministerial level is guaranteed and carried out according to:
This working group set up under the Order No 39 (abovementioned),is responsible for the coordination and monitoring of the screening of sectoral legislation and therefore standardising the process with the best practices in this regard. As reported, the screening report on mining is finalised and findings and recommendations are shared with all stakeholders involved. The report concludes that there is no need for legislative amendments in the mining sector. The proportionality test was carried out and it shows that the requirements for mining service providers are necessary to meet the objectives. The requirements are compliant with the overriding reason as defined by the Services Directive. The screening process in mining and the prepared report are used as a training model for the other sectoral screenings. Therefore, the first discussion of the process, methodology and questionnaire filling out in mining was shared with the technical working group on VET. Following the same approach as with mining, the screening report of VET is at the final stage of preparation. The report on mining was shared with EU Delegation in Albania for comments and suggestions. As this report is serving as guideline for upcoming screenings, we are consulting it with the EU Delegation and the Commission so that we follow the most relevant approach. Moreover, the report on VET will be also shared with the Commission. We have selected one included and one excluded sector to test the methodology, confident that that the consultation with EU services will help us to unify the practice for both included and excluded sectors, as defined by the Services Directive. Amendments to national legislation identified as necessary during the screening, will be included in the National Plan for European Integration during its annual updates. The draft law “On services in the Republic Of Albania” is prepared. The draft law aims:
This draft law has partially transposed the Services Directive, excluding provisions mandatory for EU Member States. Currently, the draft law is under discussion within the technical working group. The formal consultation process will start in February 2015. It would be a two tier consultation process, with the private sector and line ministries. Due to complexity and intricate nature of this particular piece of legislation, the consultation process will include lawyers, attorneys and representatives of other legal services. In addition to this, a draft law on some amendments and addenda to Law No 9723 of 3.05.2007 “On National registration Center”, as amended, is prepared aiming:
Concerning concrete steps envisaged to prepare the alignment with the Services Directive, three additional sectoral legislation screenings are planned. These sectors include: tax services, social and legal services. The deadline for the screenings is September 2015. A list of other sectors to be screened is being set up based on the screening reports prepared by other member States during the accession process. Administrative capacity for the transposition of the Services Directive Formal trainings were carried out in the area of right of establishment and free movement of services in June – December 2015 and were focused on:
The approach developed in these trainings will be used in the coming trainings, focusing in particular on the methodology and the questionnaire completion. These trainings will be carried out at the start of the screening process for the three abovementioned sectors (tax services, social and legal services). Online training is provided by the Albanian School of Public Administration. The on-line training has two modules, elaborating:
These training materials are available at ASPA’s webpage (www.aspa.gov.al). Use of this exercise will be advocated. Postal services: Changes to the Postal Law; update on liberalisation; implementation of the Postal Strategy; administrative and enforcement capacity of the Electronic and Postal Communication Authority Concerning the 2014 EC Progress Report for compliance of legislation on postal services with EU acquis, the draft law “On Postal Services in the Republic of Albania” was endorsed by the Council of Ministers with its Decision No 148 of 18.02.2015. The draft law is submitted for adoption to the Parliament. For detailed information on the approximation of the EU acquis and the preparation process of the draft law, please see the information submitted to EC services under the EU – Albania Subcommittee on Internal Market and Competition, 5 March 2015. Concerning institutional capacities, AKEP implementing the Decision of the Parliament No 11/2014 of 20.02.2014 “On approval of the structure, organigramme, and classification of the work positions of the Electronic and Postal Communications Authority (AKEP)”, finalised its restructuring on 13.06.2014, which included the set up of a separate unit under the Directorate of Market Surveillance, Tariffs and Postal Service, tasked to regulate the postal sector in Albania. In October 2014, AKEP started the procurement procedures for the reconstruction of its offices in Tirana. AKEP is planning to use 49,378,000 ALL without VAT (approximately Euro 352,000) of its own funds for this reconstruction. Mutual recognition of professional qualifications: update on legislative alignment with the EU acquis; implementation of existing legislation, including the Law on Regulated Professions Regarding regulated professions, the Ministry of Education and Sport is working to implement the obligations of Directive 2013/55/EU amending Directive 2005/36/EC on the recognition of professional qualifications. Law No 90/2014 of 17.07 2014 “On an addenda to Law No 10171 of 22.10.2009 “On regulated professions in the Republic of Albania” was approved. This amendment adds two new professions, social worker and psychologist to the current list of ten regulated professions26. With the new changes of the law, also candidates which exercising these two professions will be subject to state exams organized by National Exams Agency (NEA) prior to exercising their profession. The National Exam Agency (NEA) by means of Directorate for State Exams is responsible for organizing state exams for regulated professions. The candidates for regulated profession acquire the right to exercise such professions only after successfully completing the respective state exams. NEA has increased cooperation and coordination with professional orders and central institutions increasing responsibility and precision in each procedure and prepared information and ensuring uniformity in candidate assessment at national level by means of verification of necessary professional skills according to specifics of each profession. During January 2015, the Seventh session of exams was organized for the following regulated professions: nurse, imager, physiotherapist, midwife, logopedy, Lab technician. In total 1,192 candidates participated in these exams. The distribution by profile is Physiotherapy (48 candidates), imagery (31 candidates), nurse (961 candidates), midwife (96 candidates), logopedy (4 candidates) and lab technician (52 candidates). During the period April-July 2014, NEA has organized state exams for the following professions: doctor of medicine, pharmacist, dental practitioner, logoped, lab technician, imager and physiotherapist. In total 213 candidates were registered for those exams and 82% of them have participated in respective exams. Overall success rate is 55%. In July 2014 teachers state exams took place for about 1,091 candidates registered at RED/EO for the following profiles: English Language, Italian Language, French Language, German Language, Albanian Language and literature, social sciences, history, geography, history-geography, mathematics, physics, mathematic-physics, informatics, mathematic-informatics, chemistry, biology, biology-chemistry, physical education, figurative Arts, music, basic education, history-geography citizenship. From the total of registered candidates only 898 of them participated in state exams (nation-wide), 59.35% of which (or 533 candidates) were qualified as successful in state exams for the profiles of teaching. Institutional and administrative capacity concerning regulation professions The National Examination Agency (NEA) is a dependent institution of Ministry of Education and Sport responsible for organizing the process of State Matura (SM) and for conducting state exams for regulating professions. In order to successfully face the challenges of State Exams Process, NEA has qualified and trained the staff of evaluation directorates aiming to increase their expertise. Moreover, trainings were organized by well-known international institutions regarding improvement of expertise in the area of standardized evaluation and national exams. Legislative alignment and enforcement, including the adoption of amendments to the Law on Entrepreneurs and Companies As previously reported under the December 2014 follow report to IMC Subcommittee, the Law No 129/2014 of 2.10.2014 “On some amendments to Law No 9901 of 14.04.20008 ‘On Entrepreneurs and Companies” was adopted. The amendments entered into force on 7.11.2014. Corporate Governance Code (CGC) was prepared and made available to businesses in 2011. Considering the assessment of the implementation of the CGC by companies as crucial to the improvement of their internal capacities, the Ministry of Economic Development, Tourism, Trade and Entrepreneurship (MEDTTE) started in 2014 the evaluation process, to assess the implementation and impact of this Code to businesses. MEDTTE in cooperation with Corporate Governance Institute and GIZ organised on 15.10.2014 a workshop aiming to raise awareness on the benefits of the CGC. An assessment questionnaire was made available to businesses through the National Registration Centre. 33 questionnaires are collected with NRC support. As the number of questionnaire was not representative, with the support of the Institute of Corporate Governance and GIZ, around 100 questionnaires are filled in through face to face meetings. The report on the implementation of CGC is at the final drafting stage. Institutional/administrative capacity, including technical infrastructure for e-signature The National Authority for Electronic Certification (NAEC) is the responsible institution for the implementation of Law No 9880 of 25.02.2008 “On electronic signatures” and Decision of Council of Ministers No 525 of 13.15.2009 “On the approval of the Regulation on Electronic Signature,” as well as Technical Specifications adopted by the European Telecommunications Standards Institute, and other related international standards, which are mandatory to be fulfilled by a qualified Certification Service Provider (CSP). The main adopted standards include ISO/IEC 15408, ETSI 101 456, ISO IEC 27001, FIPS 140-1 and 140-2, or their respective equivalents. Operational procedures and the secure signature-creation devices must fulfil the security criteria according to EU requirements, EAL 3+ or E2. NAEC is currently preparing the necessary legal amendments to be in full compliance with the Regulation (EU) No 910/2014 of the European Parliament and of the Council of 23 July 2014 on electronic identification and trust services for electronic transactions in the internal market and repealing Directive 1999/93/EC. All CSPs and Assessment Bodies operating in the Republic of Albania are required to be registered/accredited and audited by NAEC. The register containing these subjects, is published in the official website of NAEC (http://www.akce.gov.al/al/regjistri), together with links to all issued certificates, revoked certificates, etc. Two CSPs are currently accredited:
Authentication and Qualified Signature Certificates are stored inside the new National ID Card, issued after February 2014. Both issuance and usage of these certificates is voluntary. All citizens that have an ID card issued prior to January 2014, can get the certificates free of charge from ALEAT Ltd. According to ALEAT Ltd, 139,612 electronic certificates were issued until the end of 2014 in the ID cards, and 3,740 certificates were revoked. No statistics are available to differentiate if the citizens use the certificates as natural persons or as businesses, because they can use it for both purposes. The only public institution that currently offers services towards citizens and other legal entities via the electronic signature is the National Registration Centre. In 2014, NRC issued 1,548 abstracts on business entities and 1,800 de-registration certificates, with electronic signature (as certified from NAIS). The authentication is currently in progress and being integrated with the Login functionalities of the e-Albania Portal and for the National Registration Canter ’ s application, to obtain a company extract and to apply for a new business entity. NRC has built the necessary infrastructure to allow e-registration. The system will be tested in February and it will provide online notifications of balance sheets, and other documents pertaining to the Commercial Register. Based on the Law No 9723 of 3.05.2007 “On National Registration Centre”, as amended the annual balance sheet and the audit report will be should submitted online. These requirements are in accordance with the provisions of the legislation on accounting and financial statements of commercial subjects. Any accompanying document is freely accessible to the public through the official website of the NRC. Update on legislative alignment and enforcement: update on adoption of amendments to the Law on Audit In 2014, NACA improved the version of National Accounting Standards in concordance with International Financial Reporting Standards for Small and Medium Entities. With the Order of Minister of Finances No 64 of 22.07.2014, these standards entered in force and were declared mandatory. The effective date of the standards implementation is 1 January 2015. NACA will initiate setting a national accounting standard for non profit entities. This project is still in process and is expected to be concluded by the end of 2015. In order to discuss with third parties for the implementation of the NAS (improved version, in the second half of 2015, seven round tables are planned: four in Tirana and three in other cities. As regards the concordance table with the new accounting Directive 2013/34/EU, NACA has decided to amend the law of accounting and financial statements. This project is also in progress and is expected to be concluded within 2015. Regarding the inspecting role of NACA, there are no legal changes/amendments to its regulatory framework. It collaborates continuously with the National Registration Centre, but it still carries out a modest control of a group of revised entities, as NAC has only three specialists. NACA has completed using TRADOS translation software, the translation, review and consolidation of NAS/IAS (2013 version) in Albanian. The translation, review and consolidation of NAS/IAS 2014, is still in process. Regarding Auditing, under the outputs of the component 1 of CFREP project, a very first draft for revision of the existing Law No 10091 of 5.03.2009 on the audit is prepared. The main concern in this draft is the independence of the public oversight system in Albania, considering its composition, and its human and financial resources. However, there is still discussion with the Ministry of Finance, because considering the fact the statutory audit directive has changed recently (April 2014), we may need to make more changes so as to have better compliance with the new directive requirements, regarding the issue of the public oversight system of auditors Institutional/administrative capacity, including inspection capacity of the National Accounting Council (NACA); and measures to strengthen the independence of the Public Oversight Board (POB) for the Audit Profession The strengthening of NACA capacities was made possible by the REPARIS Programme, through “Corporate Financial Reporting Enhancement Project”, component 2, “Strengthening the capacities of National Accounting Council”. Regarding independence of the public oversight system in Albania, some amendments are planned in the existing Law No 10091 of 5.03.2009 on the audit (a very first draft is prepared) in which the main concern in is to archive the POB’s independence. Addressing the EC Recommendation on Internal Market and Competition: “Albania will continue implementation of Basel II in accordance with the relevant Action Plan and the review of the 3rd pillar requirements by September 2014; It will also implement the new regulation "On capital adequacy" by December 2014”; Supervisory Council of the Bank of Albania (BoA) by the Decision No.43, dated 30.07.2014 approved some amendments to Regulation “On capital adequacy ratio (CAR)”. According to these amendments the parallel running (testing) period is now in place, and banks are providing the data to Bank of Albania according to the new COREP (Common Reports) templates approved by Decision no.43, dated 30.07.2014. The new regulation “On capital adequacy ratio”, which has entered into force on 31 December 2014, harmonises the Bank of Albania's regulatory framework requirements to Basel Committee requirements on New Capital Accord (Basel II) and European directives on the activity of credit institutions. The Bank of Albania uses the standardised approach for the calculation of the capital requirement for credit, market and operational risk, reflected in the Capital Adequacy Ratio (CAR). The revision of the prudential requirements on bank own funds concluded within the year 2014, in accordance with the European regulation on the activity of the credit institutions, with the approval of regulation “On regulatory capital of the bank”, by the Decision No. 69, dated 18.12.2014 of the Supervisory Council of Bank of Albania. Provisions of this Regulation are drafted partly in line with Regulation (EU) No.575/2013 “On prudential requirements for credit institutions and investment firms”. This Regulation will enter into force on March 31, 2015. Regulation No.60, dated 19.08.2008 “For the minimum requirements of disclosing information from banks and foreign bank branches” has been revised according to the Basel II/III requirements (Pillar 3 - on market discipline) and European Regulation No.575/2013 “On prudential requirements for credit institutions and investment firms” as well. The draft-regulation is under the discussion process28 and will be approved by Supervisory Council of Bank of Albania by the first quarter of 2015. Addressing the EC Recommendation on Internal Market and Competition: Albania is encouraged to prepare a roadmap for Basel III implementation. The European Commission will examine the possibility of providing for this reason technical assistance. The Supervision Department of the Bank of Albania has already begun its preparatory work for moving toward Basel III. In the second half of 2015 BoA will start an impact study with banking sector for assessing the level of LCR in Albanian Banking System. Based on these results, Bank of Albania will see the possibility of refining the liquidity ratio already in force. Addressing the EC Recommendation on Internal Market and Competition: The Supervisory Department of the Bank of Albania (BoA) will implement the European Risk Assessment System (RAS) starting from January 2015. The new Supervisory Policy was approved by decision No.9, dated 26.02.2014 of the Supervisory Council of the Bank of Albania, and the examination manual for Risk Assessment System was approved by order No.590, dated 27.02.2014 of the First Deputy Governor of Bank of Albania. Both documents are in line with the European methodology and have entered into force on January 2015. During 2014 Supervision Department has carried out the evaluation process of the banks performed both with the present CAMELS system and RAS, in order to ensure a smooth transition to RAS by the beginning of 2015 and fine tune various technical details that come out during field evidence by the examiners. Addressing the EC Recommendation on Economic and Financial and Statistics Issues: Further measures are needed in order to address the non-performing loan issue, which hinders the financial intermediation. Following the proposals of Bank of Albania, Ministry of Finance drafted some amendments to the Law no.32/2014 dated 03.04.2014 “On income taxes”, as amended. These amendments aimed at easing the loan write-off process and clarifying the ambiguous law terms for the interpretation of bad debts provisions as a deductible expense for fiscal purpose. In addition, BoA changed its respective regulatory framework, through the Decision no.22 of Supervisory Council dated 27.02.2014 on some amendments to the Regulation “On Credit Risk Administration”. These amendments consisted in putting the loan writing-off process on obligatory terms whether the loans have been classified as loss for at least three years. The amendments entered into force on January 1, 2015. In cooperation with Financial Sector Advisory Center (FinSAC), a World Bank project, Bank of Albania is involved in finalizing the project which aims at establishing a Non-Performing Loan resolution framework. The project aims at bringing banks together in preparing a common Recovery and Resolution Plans (RRP) for large non-performing borrowers that were financed by more than a bank. The project is assisted by two consulting companies of international experience on the field, hired by FinSAC. At the same time, preparing of common Recovery and Resolution Plans (RRPs) by banks on large interbank exposed borrowers was determined as a regulatory requirement by Bank of Albania, (Decision no.10, date 26.02.2014 “On the risk management from large exposures of banks”). These amendments entered into force on December 31, 2014. The Financial Supervisory Authority during 2014, pursuant to the SAA, Article 89 "Banks, insurance and other financial services", has deepened the efforts to approximate the legal framework with EU legislation in the field of non-banking financial market, and pursuant to the recommendations of the Report of Progress in 2014, with the aim of further improving this market, strengthening the supervision and institutional capacity. Insurance Market Income from gross written premiums of insurance in 2014 amounted ALL 11,6 billion (82,7 million Euro) or 36,19% more compared to the year 2013. The market continued to be dominated by non-life insurance, with around 90.93% of total volume of premiums, compared to life insurance with 8,83% and reinsurance activity by 0,23%. Viewed from the point of view of the market by type of insurance, compulsory and voluntary, gross written premiums of voluntary insurance occupied 40.34% and gross written premiums of compulsory insurance took 59,66% of the total market. During 2014, gross claims paid amounted to about ALL 2.82 billion or 4.67% more compared with year 2013. At the end of 2014 in the Albanian insurance market exercised its activity 10 insurance companies from which 7 non-life insurance, 2 life insurance companies and a life and non-life insurance company. Foreign capital in this market accounted for about 40% compared with the registered capital of the insurance companies. The main aim of the FSA to undertake its legal regulatory initiatives in the insurance market has been and remains the approximation with EU acquis and commitments made under Articles 50, 57, 70, 89 of the Stabilisation and Association Agreement. Among the most important legislative initiatives are: Law no. 52, dated 22.05.2014 "On the insurance and reinsurance activity” In May of 2014, the Parliament approved Law no. 52, dated 22.05.2014 "On the insurance and reinsurance activity". The law, which came into force on the 4th of July 2014,determines the principles and specifies the procedures relating to the establishment, organization, management, operation and supervision of insurance, reinsurance and insurance intermediary activity, so that the insurance market operates in a safe, sustainable and transparent environment. The law also seeks to strengthen and protect the rights of insurance consumers. The implementation of this law will serve to the realization of the aim of the AFSA to further enhance the degree of compliance and implementation of the EU Directives and Insurance Core Principles of the International Association of Insurance Supervisors, IAIS, where the AFSA is a member. The new law creates the possibility for the application of risk based supervision, which is a shift from the current supervisory philosophy of the insurance market in the country. Meanwhile the Authority is working on the drafting of the respective bylaws that are obligatory for the implementation of this law. Amendments to Law 10076, dated 12.02.2009 "On compulsory insurance in the transport sector" The AFSA continued to work for the preparation of amendments to Law no. 10076, dated 12.02.2009 "On compulsory insurance in the transport sector", pursuant to the Progress Reports recommendations, the recommendations of the Sub Committee of Internal Market and Competition, as well pursuant to the recommendations of the joint IMF mission and World Bank in the framework of the Financial Sector Assessment Program (FSAP). The AFSA is currently reviewing the comments and suggestions received from the different stakeholders, comments which will be reflected as appropriately in the amendments of this law. Also in view of the legal regulation of the insurance market and an effective supervision of the activities of the operators of this market, as well as for the implementation of new Law no. 52, dated 22.05.2014 "On the insurance and reinsurance activity” in 2014 the AFSA has drafted or amended bylaws as follows:
Voluntary pension market During 2014 in the market continued to operate three management companies of voluntary pension funds and 3 banks as depositories of pension funds.
The number of members in pension funds at the end of 2014 was 8. 491 members with an increase of 7.66% compared with the end of 2013. During 2014, the AFSA, in cooperation with the World Bank experts continued to work on the amendments to the law no. 10197 dated 10.12.2009 "On the voluntary pension funds". Changes in the law aim its alignment with Directive 2003/41/EC of the European Parliament and the European Council of 3 June 2003 “On the activities and supervision of institutions for occupational pension”, and also with the principles of supervision of private pension of the International Organisation of Pension Supervisors (IOPS), as well as with the OECD Guidelines. The AFSA is now working to reflect the comments and suggestions of the stakeholders as appropriately in the amendments of this law. Securities market The retail market of government securities During the reporting period one of the most active segments of the securities market was the retail trade securities Albanian Government (treasury bills and bonds) market. In this market continued to operate 8 banks and the Albanian Post, licensed by the Authority to carry out this type of activity. The performance of the Government Securities retail market outcomes may be followed on a daily basis via the official website of the FSA, in the GSRM section. The volume of secondary market of securities in 2014 was dominated to the extent of 77,74% by transactions in short-term instruments (treasury bills) and 22,26% of long-term instruments (bonds). In terms of number of transactions, 98,35% of all government securities retail market belonged to transactions carried out in treasury bills. The statistical data on the Government securities retail market for the year 2014 indicated that the market was dominated by transactions "Purchase in the primary market" and "Settlement of nominal value at maturity" with respectively 61,87% and 19,95% versus the overall volume. Participation in the retail market of the Government securities is dominated by individual investors, who perform about 97,67% of all transactions in this market, in comparison with legal persons. Investment Funds In the past three years the activity of investment funds was significantly increased. For the first time in 2012 the assets of investment funds accounted for almost half of the total assets of the non-banking financial markets. Even in the last two years, 2013 and 2014, investment funds were already listed as the largest market based on the total assets available to them. During the year 2014 in the market of investment funds exercised their activity two funds, namely "Raiffeisen Prestige Investment Fund'' and "Raiffeisen Invest Euro Fund''. According to the data analysis for the development of the Investment Funds on 31.12.2014, their net asset value reached ALL 63,74 billion (455 million Euro) with an increase of 26,64% compared to 31.12.2013. This market is dominated by investment in Government Bonds, which represent 76, 12% of funds assets, with an increase of 14, 94% compared to 31.12.2013. The number of members who have invested in the investment funds on 31.12.2014 was 32.669 members, against 28.442 members on 31.12.2013. In view of the legal regulation to an ever increasing investment fund market and in order to achieve an effective supervision of the activities of operators in this market, during 2014 the AFSA has adopted new bylaws or amended existing ones, as follows:
Drafting of two regulations in the field of investment funds The AFSA is preparing two draft regulations applicable to collective investment funds (CIS) dealing with the liquidity risk management and asset valuation to reflect international practices. Both sets of rules were discussed with the experts from the World Bank and IMF. Through close consultation with the World Bank and the International Monetary Fund, regulations are expected to be completed respectively:
The AFSA and the IMF agreed that both regulations must be approved by June 2015 and no new license will be issued for CIS within this deadline. Institutional capacities Approval of the amendments to the Law on the Financial Supervisory Authority On the 17th of July 2014 entered into force the Law No. 54/2014 Amending Law No. 9572 of 3 July 2006 “On the Financial Supervisory Authority”. This Law was adopted by the Parliament of Albania on 29 May 2014. Its amendments will strengthen the supervisory and regulatory role of the Albanian Financial Supervisory Authority in the context of achieving its goals through the reinforcement of its independence and accountability. The Law was drafted by AFSA in cooperation with international experts from the Financial Service Voluntary Corps, by taking also in consideration the legislation of a number of other countries with developed financial markets. In addition, during the drafting of the law were kept in mind the recommendations given by the World Bank, the European Commission in its Albania Progress Report, the International Monetary Fund and the Financial Stability Assessment Program 2013-2014. According to the amendments of this law the AFSA Board will consist of 5 members, of which only 3 were appointed by Parliament in December 2014, and 2 of them are respectively the General Executive Director and Vice Executive Director of the Authority. In the mean time the Chairman and one of the member of the AFSA Board have not yet been approved by Parliament. According to the Article 24 of the Law No. 54/2014 amending Law No. 9572 of 3 July 2006 “On the Financial Supervisory Authority” the new board after one month from its approval should adopt the organizational structure of the Authority. In order for the new Law no. 54/2014, "On amendments of the Law No. 9572, dated 03.07.2006 "On the Financial Supervisory Authority" to become fully effective and enforceable, the Parliament also approved the following changes in two other laws:
Various projects The AFSA has continued the work for the realization of a number of projects in order to accomplish its supervisory functions, as mentioned below: Technical assistance project on the voluntary private pension market In 2014 in the framework of implementing the recommendations of the Financial Sector Assessment Program (FSAP) and with World Bank support under the Financial Sector Reform and Strengthening Initiative, the AFSA has begun the implementation of a technical assistance project on the supervision and expansion of the voluntary private pension market in Albania. The project focuses on two basic components:
The assistance project time period is 18 months and it is expected to conclude in 2015. The week of 7-11 July 2014 marked the beginning of the project, where the expert team of the World Bank reviewed together with the AFSA staff and other stakeholders, such as pension fund management companies, government institutions and businesses, the potential and conditions for encouraging the development of the pension market.
The AFSA is currently drafting the terms of reference of this project, which is expected to start in March 2015. Various project in collaboration with FSVC
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