Despite high interest rates and slowing economic activity, last year saw a pick-up in banking intermediation in SEE-5 (Albania, Bulgaria, FYROM, Romania and Serbia).

This resulted mainly from the relaxation of measures designed to counter credit expansion in the two new EU member states of Bulgaria and Romania in January 2007 and greater confidence in the banking system.

Indeed, the past year saw high growth in bank deposits and lending, at 36.1 per cent and 57.5 per cent, respectively, while the ratio of deposits and loans-to-GDP increased further to 37.3 per cent and 41.1 per cent, respectively.

Specifically, lending to households remain the main driver of credit activity, growing by 74.1 per cent and leading the ratio of household loans-to-GDP to 18 per cent at end-2007 compared with only 1.3 per cent in 2001.