DETERMINANTS OF BANK DEPOSITS IN ALBANIA

Abstract

This study aims to identify the factors that influence the level of deposits at commercial banks in Albania, considering the literature gap about banks operating in this country. The population comprises secondary data from six commercial banks operating in Albania between 2009 and 2020. The information was extracted from the Albanian Association of Banks' annual reports. The dependent variable in this study was the deposit levels of commercial banks. This study utilized internal (capital sufficiency and ROA) and external factors as explanatory variables (GDP growth rate, remittances and population growth). The investigation was conducted using the weighted least square approach and cross-sectional time series data. Using the statistical package developed by  Gretl (2012), the results indicate that the coefficients of capital adequacy and remittances are negative and significant. In contrast, the coefficient of ROA is positive and significant. In addition, regression analysis revealed that the GDP growth rate had a negative but not statistically significant effect on commercial bank deposits. In contrast, population growth had a positive but not statistically significant effect on deposits. The analysis concludes that attention should be paid to capital adequacy because it causes a decline in deposits and because remittances are not positively connected with deposits as anticipated. These findings may be valuable to various actors functioning in the banking business or to other researchers who wish to do additional research on the same topic.