BANK OF ALBANIA STATEMENT
On the financial system stability in Albania

The Bank of Albania observes that in the second part of 2004, positive developments in the banking system, mainly associated to the consolidation of competitiveness conditions in the country, were highlighted. The stability in the increasing of bank branches number is accompanied with a quicker movement in terms of introducing contemporary payment instruments, especially debit and credit cards activity. The operation of more than 76 cash withdrawal automated machines is enriched also with the efforts exerted to establish terminals of debit and credit card sales, initially close to the important social institutions.

Among the main financial indicators of the banking system for the last period, we may mention:

The Bank of Albania considers as important for the present the issues raised in the same document, published in August 2004, on the developments during the first semester of the last year. Considering the importance we give, we deem necessary to underline these elements, more specifically:
 

• Strengthening of control systems. Banks should strengthen on a continuous basis their identification and risk management systems, under the conditions when the market competition is increasing. The emphasis is to be put on the adaptability of the necessary practices for monitoring the main and delicate activities of banks, that relate mainly to the information technology and communication systems, to the foreign exchange activities and funds investment, etc. A special attention is to be attached to the lending activity, where there is a necessity for improving and completing the proceedings, for identifying and developing the ways that allow the information exchange between banks on the borrowers and their quality data, etc.
• Leading structure responsibility. The bank's leading structures, including the Board of Directors, the audit committee and executive managers, are responsible for establishing the conditions and applying the aforementioned requirements.
• Public role. In this process it is important the customers and public in general are informed and they should play their role. The customers and public have the right to ask for transparency of action in the banking practices, an equal treatment among the client's categories, and also to conduct a continuous monitoring for their claims and their financial liabilities with the bank. Through exercising their rights, the customers and public in general exercise a controlling role on the banking activity and contribute in conducting it pursuant to the best practices.
• Cash reduction in the economy. The banking system may play a more active role in the common goal toward the reduction of cash transactions and informal economy. The expansion of the banking system and its further approximation to the public, as well as the entry of new products that promote new ways of payment and provide the desirable comfort, are developments strongly supported by the Bank of Albania in order to further continue with them in the future. We think that this process would be more successful if there would be a stronger commitment from all the relevant governmental institutions.

Further, the Bank of Albania draws the attention of the banks, other institutions of the country and the public on the following issues:

• Implementation of standards. International standards in terms of regulatory framework and conduct of banking activity have known new developments. These developments are related to the final publication of the document "New Basel Accord" (known as Basel II) and to the developments in terms of accounting standards and financial statements reporting (known as IAS/IFRS). The obligations that arise from the domestic legal framework requirements, from the diversity and origin of the banking institutions that operate within the country, and by the necessity that their activity be more and more oriented towards the best international standards, make unavoidable the impact of these changes in the banking and financial system activity in our country and its relationships with the third parties.
• Harmonization of actions. Banks and other financial institutions, which have a role to play in implementing into practice the standards, mentioned above, must have a clear strategy on the way they fulfil this role and their objectives. The Bank of Albania deems that it is necessary to institutionalise a common discussion process, where to discuss on the issues that will emerge in the preparatory stage, in order that issues be not only understood, but also their solution be harmonized and stable in time.

Finally, the Bank of Albania expects that during 2005 the banking and financial system consolidates the so-far achievements through continuing a stable activity, giving a more significant contribution in the country's economic development.