The Bank of Albania, in cooperation with other authorities, contributes to the maintenance of safeguarding financial stability in Albania. The Bank of Albania drafts and implements the macro-prudential policy, which aims to prevent risks that threaten financial stability and increase the sustainability of banks and other financial institutions.
WHAT IS FINANCIAL STABILITY AND WHAT THREATENS IT?
An economy develops under the conditions of financial stability, when:
- the financial system performs its financial intermediation and risk management functions, thus aiding the clients and economic entities to conduct financial transactions related to saving, investment, borrowing, payments and risk management.
- financial institution are prepared to cope with shocks of different sizes and forms.
Financial stability may be affected by:
- internal weaknesses of one or several institutions of the financial system,
- shocks coming from interaction with the external economic environment,
- the combined effect of these these two factors.
The shocks from interaction with the external environment may be caused by:
- changes in macroeconomic policies or in the institutional framework,
- a pronounced fluctuation in capital flows, particularly in those of the portfolio, caused by changes in the financial and economic cycle with partner countries.
WHO BENEFITS FROM FINANCIAL STABILITY?
Financial stability serves to the economy and economic agents; more specifically the following benefit:
- households, enterprises, other private and public entities;
- financial systems;
- public authorities.
When there is financial stability, economic growth is more sound and stable because: the savings and investments of the private and public economic agents are brought closer to the expectations and contractual terms, the markets function better and help to realize the financial need of economic entities more efficiently; there is higher resilience against financial stress situations, the financial crises are avoided and taxpayers do not pay for their costs, economic policies of the central bank and other public authorities are more effective.