PRESS RELEASE
Q&A with Governor Fullani at the press conference on BoA Supervisory Council decisions on Monetary Policy, 26 January 2011

Question: Mr. Governor, do you think that violent protests, such as that of a few days ago, may have an effect on the economy? What would be the suggestions of the Bank of Albania in this regard? Some comments circulate on the internet that Albanian shares of foreign investors dropped in the stock market, exactly on 21 January.

The Governor: Any initiative for action, any dispute, conflict or political confrontation has its costs on the economy, whether visible or invisible, direct or indirect, in the present or in the future. We should all understand that the economy and politics function like a communications vessel. In my opinion, they are like Siamese twins sharing the same backbone.

I would like to confirm the finding of the Bank of Albania and international reports that the Albanian economy is fully immune to short-term shocks and that the banking system is well-capitalised, healthy and, above all, enjoys the trust of international institutions and the confidence of Albanian citizens. Moreover, we need to keep in mind that in the context of Albania's changeover from a country in transition into an emerging market economy, the current year, that is 2011, should be understood to be different from preceding years because we have, at the same time, both the EU and NATO components. This means that Albania's equation has changed in mathematic terms; its denominator has changed by an internal factorization of these two key elements. This means additional trust and confidence in the Albanian economy and the Albanian banking and financial systems, increasing, in turn, the responsibility for a smooth progress of this system. Under these circumstances, we need to understand that the monitoring of the Albanian economy and its banking and financial systems by authorized international institutions with regard to the political element is crucial.  Political risk is a basis to the assessment of the Albanian economy by international agents and foreign and Albanian investors. It is like grading Albania's progress. 

Question: PM Berisha has spoken of an increased fiscal burden for the banking system and that this additional burden shall tax profits that are considered to fall outside the so-called 'moral code of profit', according to him. I would like to ask whether the Bank of Albania would favour this initiative. Secondly, do you believe that this mechanism would be effective for the purpose that the government claims it to be, that is to say, to reduce prices for bank products and services? Do you believe that prices will be reduced if taxes are increased?

The Governor: We do not have this proposal on our desks. When we receive such a proposal we will make our assessment.

I would also like to say that this is part of a broad discussion and the media are not only witnesses, but also strong actors in conveying this policy. During the last five years, we have focused on prudence, financial stability and an appropriate macroeconomic policy; before, during and now after the crisis, which was factorised by amendments to the law on banks, establishment of the Credit Register and regulatory amendments on transparency, better governance of banks, and risk control and management by the banking sector.

A broad dialogue, monitored by the media as well, has taken place and a consensus has been reached with banks for these issues to be addressed in economic terms supported by administrative measures of the Bank of Albania. We may say with certainty that the time is ripe and the best moment is today, as the Albanian banking sector showed strong solidity and did not subject to direct crisis attacks.
The conditions are now most suitable so that four key elements be improved: transparency, governance, internal control and risk management. This is also supported by the respective regulation that we approved last week on operational risk and a number of additional regulations we are drafting.

Furthermore, the Bank of Albania will take a number of measures to ease Lekë transactions costs, which are related to the payment system in Albania. However, as I said in my remarks in the regional meeting of the Bank of Albania in Shkodra, it is a move for a regulation towards caution, financial stability, competitiveness and reduction of effective costs. We are talking mainly about Lekë costs, since foreign currency costs are comparable to those in the countries of the region and beyond, the Bank of Albania deems.

Continuation of structural reforms related directly or indirectly to banking system costs is crucial. Moreover, I have underlined the significance of costs related to property issues, registration and execution of collateral and well-functioning of the judiciary, which is directly related to the banking system.