Speech of the Governor of the Bank of Albania, Mr. Ardian Fullani, at the Presentation of the Annual Report 2008 to the Albanian Parliament, 16 April 2009

Publication date: 16.04.2009


Honourable Ms. Chairwoman,

Dear deputies,

Pursuant to the legal requirement, it is a great honour and privilege to present before you the Bank of Albania Report for the year 2008. I avail myself of this opportunity to extend my gratitude to the Albanian Parliament for the support and understanding provided to the central bank.

The year 2008 confronted us with an intricate situation which swept the economy worldwide. In particular starting from September, a number of newly experienced events hit the U.S. financial infrastructure. The high integration of the financial market had allowed the spread of toxic products to the advanced economies, including the Asian growing economies as well. Within a short period of time, the global economy found itself amidst an all-embracing upheaval yielding slumping public confidence in the financial system. Prices in all main stock markets began to fall swiftly while the largest banks reported substantial losses.

Many reputable financial institutions collapsed which forced the authorities to take a number of rescue actions. The governments and central banks of advanced economies, including the specialized international institutions, adopted a number of emergent measures. In order to restore public confidence in the banking system capital was injected in addition to liquidity and toxic assets were purchased through public funds.

World trade was severely hit by the global crisis which spread swiftly to the emerging and low-income countries as well.

Emerging countries are experiencing a downturn in their financial conditions, tightening of lending, pressures over the exchange rate and considerable slump of demand in vital sectors of economic activity. As of end 2008 and beginning of 2009, some of the emerging countries - new European Union member states - were severely hit. In the face of a general balance of payments crisis, Hungary, Romania, Bulgaria, the Baltic States and other countries like Ukraine, Serbia, Belarus etc., addressed to the International Monetary Fund for emergency assistance.

The end of 2008 and January 2009 attested to the contraction of economic activity in the U.S., Germany, Italy, Great Britain and Japan. The international markets remain highly volatile and have added the uncertainties and vagueness among the participants. Notwithstanding the numerous efforts at a global level, question marks hang over the future. The meeting in London represents one of these efforts, where the G-20 leaders agreed to commit USD 1.1 trillion to fuel economic activity at a global level, including the assistance to poor countries through the strengthening of the International Monetary Fund role.

The above situation provides evidence for the upward pressure the world economy in general and Albania's partner countries in particular are generating over the yet frail Albanian economy. The international developments and the implications on the Albanian economic activity have been constantly addressed in my public speeches, press statements of the Bank of Albania Supervisory Council and other official documents of the central bank.

The Albanian economy has by and large shown high resilience to the phenomena characterizing the global economy in the last quarter of 2008. The Albanian banking system displayed high levels of immunity and did not manifest any signs of panic or perplexity. A few experts have considered Albania a fortunate country while others recognize the reduced integration of the Albanian economy into the global economy as the main cause.

The Bank of Albania considers that the reason stands in the ever-increasing attention the banking system's financial stability has been paid to in the recent years. The Albanian economy is as integrated as the other Balkan countries, some of which have already thrown in the towel. Allow me please to dwell further.

The Albanian banking system may be considered an extension of more developed European countries' banking system. The banking groups with their headquarters located in the Euro Zone countries and extended throughout the region and broader hold 80 percent of the Albanian banking system's assets.

The extension of the same banking groups to a number of countries caused the lending and deposit collection policies to be similar for all countries. Consequently, the exposure to risks these policies posed was similar for Albania, Bulgaria, Romania or Serbia for instance. According to this line of reasoning, it may be concluded that Albania's financial integration has been similar to the levels of the regional countries in terms of number of operators, types and products provided.

As in the majority of other countries, Albania had the regular sovereign rating being assigned B1 in 2006 and in 2008 as well. Other regional countries were assigned similar sovereign ratings causing the foreign investors' perception of risk to be more or less similar. This fact is also confirmed by the purchase of domestic debt by international financial institutions. I would also like to underline that the capital account operations, in particular from the foreign investors' viewpoint, are entirely liberalized, implying the absence of obstacles in the capital inflows and outflows.

The increased transactions with abroad is another indicator attesting to Albania's opening to the rest of the world. Exports and imports have recorded high growth rates over the course of the recent years causing Albania's trade activity to increase substantially. Around 80 percent of trade activity is carried out with the Euro Zone countries, with Italy and Greece dominating as the main partner countries. The strong trade deficit deepening was a typical sign of the so-called rapid approximation process.

This phenomenon was the main development characteristic of all East European countries which became EU members in the recent years, including the majority of the South-West Balkans Albania is part of.

I believe these arguments are sufficient to understand that we have been neither fortunate nor undeveloped or on the periphery of global developments. What has distinguished the Albanian financial system from a number of counterparts in the region are its performance and soundness indicators which to a large extent owe to the commitment and measures taken by the Bank of Albania. The policies and decisions approved over the past years have taken the form of various platforms drafted with a view to better and prudently manage the situations we have been confronted with over the passing of time.

I would like to highlight that the decisions made from the year 2006 to August 2008 in the area of monetary policy and banking supervision have constituted the immunity platform. The decisions adopted from autumn 2008 to the present constitute the crisis absorption platform. The Bank of Albania is currently working intensively on the third platform: The recovery platform.

Please allow me to dwell briefly on each of these three platforms.

The Immunity Platform

In a general context, the immunity of the Albanian economy relates to the large savings of the Albanian people materialized in the form of deposits and the Bank of Albania firmness to ban through an administrative act the penetration of some products which to other countries have resulted catastrophic.

In a more analytical context, it relates to our past actions which have built the immunity up further and served as a therapy to present events.

First, I would like to bring to your attention the monetary policy decisions from July 2006 to November 2007, when the key interest rate increased five times to 6.25 percent. This level was maintained unchanged throughout the year 2008. Our main motivation related to the overheating of the economy which primarily mirrored the high level of domestic demand owing to the growth of credit to economy. At present, the Bank of Albania considers that the monetary policy tightening has proved to be effective in curbing domestic demand in economy and having a direct impact over the credit channel in economy.

By and large, the Bank of Albania assesses that the overall macroeconomic environment has been sound in the last four years. Although official statistics are yet required to confirm, the central bank considers that the Albanian economy has performed and grown in line with the early-year projections.

This growth has mirrored the dynamic development in some sectors of the economy induced by the growth of consumption and investment in economy and the continued structural and infrastructure-related upgrades in economy.

Economic growth at home has been primarily sustained by the rapid growth of domestic demand which remains the main driver of economic growth. Consumption, investment and governmental spending recorded growth over the course of the year 2008. Foreign demand in the form of exports has grown steadily in the recent years although it remains at low levels to sustain economic growth. Economic activity has been mainly financed by domestic resources. Given its high liquidity levels over the year 2008, the Albanian banking system has managed to meet the upward demand of the economy for funds hence increasing the financial intermediation. The banking loan portfolio grew by 7.3 percentage points of the GDP.

The Bank of Albania has met its primary and mandated objective: achieve and maintain price stability in economy. Average annual inflation rate marked 3.4 percent in 2008, quite close to the 3 percent target of the Bank of Albania and within the tolerance band of 2-4 percent. The controlled inflation rate mirrors the adequate monetary conditions and the appropriate monetary policy of the Bank of Albania. The latter has balanced the demand and supply-side factors and allowed the anchoring of inflationary expectations to the Bank of Albania target.

The government pursued a more expansionary fiscal policy over the course of the year 2008. Budget deficit is assessed to account for 5.7 percent of the GDP, deepening by 2.2 percentage points in annual terms. Public debt grew to 55.6 percent of the GDP from 52.2 percent the previous year. The improved public debt management in terms of maturity term extension and diversification of financial resources represents a positive development assisting the refinancing of debt and the control of its cost impact on budget indicators.

The year 2008 was characterized by a significant growth of economic and trade exchanges with abroad. Domestic demand has been reflected in the deepening of trade and current account deficit during 2008. The latter accounts for 14.9 per cent of the GDP, being mainly affected by the rapid growth of imports and the slump of remittances over the second half of the year. However, foreign currency capital inflows have been sufficient to contribute to closing the balance of payments with a positive result for 2008. Foreign reserves of the Bank of Albania increased by about EUR 192 million or by 0.9 percentage points as a share of GDP.

The growth of money moderated relative to the previous year owing to its slowdown in the last quarter. The average annual growth rate of M3 eased to 12.3 percent compared with 15.8 percent in 2007. The increase of monetary assets in economy attributes mainly to the growth of banking loans. The degree of financial intermediation in economy increased further over the course of the year 2008.

As a share of GDP, the banking system deposits grew to 80 percent compared with 78 percent in 2007. The performance of deposits was characterized by pronounced seasonal movements displaying high growth rates in summer and marked contraction in the last quarter. On the assets side, the banking system's loan portfolio grew by about 35 percent in 2008. In terms of foreign currency structure, the loans indicated a slight shift of the loan portfolio to foreign currency. The growth rate of loans has been receding over the year reflecting both the tightening of lending standards in response to the regulatory measures of the Bank of Albania and the tightening liquidity conditions in the system.

In addition to the economic developments at home, the Albanian financial markets have also reflected the swift developments in the international financial markets. Against this background, their indicators, namely the liquidity, interest rates, trade volume and exchange rate, have been characterised by higher volatility, however, remaining within the normal functioning parameters.

The interest rates on deposits have been upward for both deposits denominated in the national currency and the euro. By contrast, the interest rates on loans have displayed a downward tendency over the course of the year 2008, bringing about reduced intermediation cost for the banking system. Worth to note is the increased attention to lending in the national currency and the enhanced competition by promoting the interest rates in this market.

Throughout the major part of 2008, the exchange rate of the Albanian Lek vis-à-vis the main foreign currencies was steady; however, it started to slightly depreciate by the end of the period. The positive performance owes to a number of factors, namely the macroeconomic stability at home, the positive balance of payments, the anchoring of inflation close to the Bank of Albania's target and the approximation of this indicator to that of the Euro Zone, as well as the positive interest rate spread.

Second, worth to note is the relatively long period of continued consolidation of the banking system, characterized by its sustained financial soundness. The year 2008 was characterized by intensive developments in the Albanian banking system. The banking activity grew further throughout the year, both in quantitative terms - geographic coverage of the country and intermediation level - and qualitative terms - the great variety of services provided and the intermediation cost. In the meantime, the withdrawal of deposits in the last quarter put the banking system's sustainability to the test. The developments over this period attested to the fact that the Albanian banking system passed its first sustainability test successfully.

Although at more moderate rates, the banking system's assets and liabilities increased further during the year 2008. The analysis of the system's indicators attests to an upward risk level and to its downward financial aptitude along the year. In terms of net result, the banking system's performance recorded a downturn over the year 2008. This reflected both the enhanced competition in the system and the rapid increase of provision cost, particularly during the second half of the year.

However, the volatility and the non-satisfactory performance of some of the main indicators have not jeopardized the regulatory capital level required for covering the risks undertaken by the banking system. The performance of these indicators is not regarded as critical; however the dynamics and intensity of developments require a more prudent monitoring on an ongoing basis.

Third, I would like to place an emphasis on the prudence shown and the regulations made in the banking supervision area. For the first time in 2006, the annual conference of the Bank of Albania was entirely focused on financial stability issues seen from the regional point of view. The governors of the regional countries altogether concluded that a small number of banks were expanding swiftly throughout the region regardless of the yet incomplete supervisory framework regulating the banks in the country of origin and their subsidiaries.

On 1 June 2007, the Law On Banks in the Republic of Albania entered into force. This Law represents the first attempt to approximate the Albanian legislation with the Acquis Communautaire and in line with the commitments under the Stabilization and Association Agreement. This Law sets out clearer principles and rules on the management of risks banks may be faced with during their activity, aiming at protecting the depositors, investors and fostering the banking system's stability.

On 31 December 2007, the Credit Registry was established representing a vital infrastructure-related development. It is an additional and useful instrument which will help to further deepen the analysis in terms of loan quality, identification of the concentration of loans by banks and borrowing entities, thorough evaluation of the latter's financing by currency, detailed analysis of the type of collateral and guarantees used and the identification of the relations between the different borrowing entities.

For the first time in the Annual Report of the Bank of Albania for the year 2007 it is quoted: 'The Bank of Albania argues that the intricate situation in the international financial markets represents a new type of risk for the Albanian financial system. However, as long as it does not transform into a global financial crisis with ramifications on the real economy worldwide, and particularly in Europe, this situation will relatively be of little effect to the domestic market.'.

Accordingly, in spring 2008 the Bank of Albania had open discussions with the banking system and addressed a package of regulatory amendments which were generally oriented to adopting more conservatory policies in several main directions of day-to-day commercial banking running. The need for amendments arose from the implementation of the new Law On Banks in the Republic of Albania, the performance of credit to economy, in particular of foreign currency-denominated credit, and the developments in the international financial markets in the mid-year 2007 and the first quarter of 2008.

The launch of this initiative in April stimulated an open debate between the central bank and the banking system. The proper assimilation of these amendments by banks was considered as highly important. This consultation process finalized in August 2008 with the approval of a package of regulations by the Supervisory Council of the Bank of Albania.

In more concrete terms, this package provided for the amendments to the following existing regulations:

  • 'On the risk management in branches of foreign banks'.
  • 'On capital adequacy ratio'.
  • 'On credit risk management'.

The following new regulations were approved:

  • 'On the minimum requirements for the disclosure of information from banks and branches of foreign banks'.
  • "On some basic criteria for the governance of banks and branches of foreign banks and their administrators".
  • "On the internal control system in banks and branches of foreign banks'.
  • 'On the transparency of banking and financial products and services'.

How would this therapy be translated into more plain words?

In compliance with the new Law On Banks in the Republic of Albania, new quantitative thresholds were set for the calculation, supervision and reporting of banks' large exposures to parent banks and related entities. More specifically, in order to minimize the risk arising from the concentrated exposure to their parent banks, commercial banks operating in Albania must not exceed a given threshold of the paid-in capital.

In order to better diversify the risk arising from the concentration in banks' investments in the international financial markets, lower thresholds were set for banks' large exposures. The calculation techniques of these exposures and the classification of financial assets used as collateral were also improved.

With the purpose of promoting a more effective banking business running, the legal infrastructure for an active and accountable internal control in banks and branches of foreign banks operating in Albania was put in place. Internal control is considered an integral part of banks' governance. Hence, this regulation sanctions the key principles for an independent, unbiased and accountable internal control. Internal control should cover each section of the bank in order to prevent the origination and development of undesired phenomena.

Accountable governance is one of the key principles to ensure a sustainable business growth. This becomes even more indispensable for financial institutions, whose success is, among others, largely dependant on public confidence in them. Accordingly, the Bank of Albania considers the quality of human capacities - implying the hiring of experts in the decision-making process and risk management - as fundamental. The de facto concentration of the decision-making in very few hands is a harmful practice. The new regulation sets out the responsibilities and duties of the managing structures of banking institutions. These structures are accountable for and guarantee the safe and sound functioning of the institutions they manage.

The transparency related to the banking and financial products and services provided was also paid a special attention. The new legal requirements standardize the manner and form of providing information to the clients on the banking products and services banks provide. Special emphasis has been placed on the mandatory disclosure of effective interest rates on deposits and loans, the constituent elements to be specified in the loan and deposit contract, the marketing of products and services, the confidentiality of client information, the handling of clients' complaints and the establishment of special structures dealing with these complaints.

Part of this new package was also the standardization of the required information that banks and branches of foreign banks should disclose, related to the banks' main activity, their organisation and management, their financial performance and position, the risk management and the accounting policies.

Fourth, I would like to call your attention that the approval of a regulatory act does not automatically imply its implementation in practice. To this end, the specialized human resources at the Bank of Albania, including the management, have been in constant contact with the banking system's management, banks' boards of directors, top management at headquarters and supervisory institutions in the parent banks' countries of origin.

Communication bridges with the relevant authorities in the regional countries have been established in the last 3 to 4 years in order to identify:

  • The magnitude of our system relative to the neighbouring countries';
  • The banks dominating the markets and their geographical coverage;
  • The products provided, the level of service and the commissioning policies;
  • The monetary policies and the supervision schemes;
  • The relationships with the supervisory authorities of parent banks;
  • The status of relationships and the co-operation perspectives with the international institutions.

At the end of this ceaseless process of co-operation and exploration we have come to conclusions which have often confronted us with ideas and practices which take a reverse course to ours. Our perseverance to administratively halt the lending to economy with the so-called exotic currencies' was the fruit of this entire process.

The recent years attested to the steadfast popularity of lending in the Swiss franc and Japanese yen owing to their very low cost and readiness to access the Albanian economy as well. Since the risk of lending in these two currencies was perceived to be high and the borrowers or banks could not provide the proper protection, the Bank of Albania banned through an administrative act the lending in these two currencies by the banking system. I believe this has also provided a direct contribution to reducing the short-term capital inflows from parent banks to their subsidiaries in the form of credit lines.

Allow me to remind you that a considerable number of emerging countries, which are now in serious need of refinancing debt in these currencies, have been trapped by these funds.

Crisis Absorption Platform

The outburst of the financial crisis in autumn 2008 - which in a number of countries was displayed in the form of a confidence crisis - extended its reach to the Albanian banking system as well. The latter was confronted with the withdrawal of deposits during October to December 2008 period owing to the justifiable reluctance of households. However, the very good capitalisation level and the satisfactory liquidity situation allowed the banking system to overcome the situation.

At present, the Albanian economy is ever-increasingly finding itself under the pressure of the global crisis.

The uncertainty reigning on global financial systems was reflected in the withdrawal of a part of deposits from the system which in turn generated liquidity issues and upward interest rates. This situation has notably lowered the aptitude and willingness of banks to lend the economy.

On the other side, world economy developments suggest that the Albanian economy may be faced with a contraction of foreign currency inflows over the course of the year 2009. These developments would further lower the aptitude of financing the economic activity and distort the balances of foreign currency demand and supply. As in many other East European countries, they lead to downward pressures on the exchange rate. Under a flexible exchange rate regime as in the Albanian case, the downward pressures are a corrective behaviour in terms of consumption, savings and investment at a micro and macro level.

From the Bank of Albania's viewpoint, the main issue the Albanian economy will be faced with over the course of the year 2009 is the liquidity shortages and consequently, the tightening of lending conditions. As pronounced in earlier public addresses, this limitation should be acknowledged and considered in the formulation of business plans of all economic agents. The Albanian economy will access less credit during the year 2009. The liquidity shortages will also lead to weaker monetary and fiscal policy response.

Against this background, greater efficiency is required in using the banking system's funds by making priority ranking of expenditures based on their impact on economic growth.

Furthermore, the Bank of Albania considers that the current account deficit behaviour should be constantly monitored.

The equalization of deficit to the reduced capital account inflows should be another key priority of economic policies development. As emphasized earlier, this moment conditions the macroeconomic and financial balances at home significantly. Therefore, it will constantly be at the focus of the Bank of Albania analysis.

In full acknowledgement of its role as an institution mandated to manage the money market, the liquidity situation, the banking system's stability and act as lender of last resort, the Bank of Albania announced in the first days of October its intent to furnish the banking system with the required liquidity ceaselessly.

With the passing of time and while constantly monitoring the situation, the Bank of Albania amended its operational framework in order to better meet the market's liquidity needs. We initially changed the form of auctions from fixed-amount to fixed price auctions, implying the supply of the market with the liquidity as required by banks at a fixed price of the key interest rate.

In addition, The Bank of Albania made some important regulatory amendments. In more concrete terms:

  • The base of securities serving as collateral for reverse repurchase agreements extended with the bonds issued by the Government that have a remaining term to maturity of no longer than 365 days.
  • The use of required reserve increased from 20 percent to 40 percent;
  • The spread between the Bank of Albania key interest rate and overnight credit reduced from 1.75 percentage points to only 0.75 percentage points.
  • Through a special regulatory act, the Bank of Albania has requested from the banking sector not to allocate the 2008 profit in the form of dividend. In this way, the banking activity capitalization is further strengthened, hence providing more guarantees for the banking sector's financial soundness in the period to follow.

These decisions helped to relax the liquidity situation and they are in line with the operational policy of the ECB in response to the crisis.

The prudent monitoring of the situation required the creation of an ad hock task force, whose main responsibility would be the daily monitoring of the situation in each individual bank. Our straight conclusion is that the aggregate indicators do not necessarily point out the truth. The idiom devil is in the detail' called for micro analysis, focusing on individual indicators of the system and individual banks.

The Bank of Albania has been conducting numerous and successive stress tests in order to identify the banking system's response to possible pessimistic scenarios. The analysis obtained from the numerous stress tests - for the banking system-wide and individual banks - indicate that neither the banking system on the whole nor any of the systemically important banks in particular have been affected in their liquidity and capitalization indicators. Notwithstanding the enhanced spectrum of risks and a more severe year in terms of expanding their banking activity, the financial system and the banking sector will remain stable.

We believe that the latest decision of the Albanian Parliament which approved the increase of the deposit insurance to ALL 2.5 million creates the grounds and removes any negative psychological barriers for the return of withdrawn deposits to the banking system. The current deposit insurance level, similar to that in the European countries, provides full and permanent guarantee for the savings of the majority of Albanian households. There is no objective reason why people should worry about the safety of their savings in banks. Any reluctance to place savings in banks increases the amount of lacked income owing to the loss of interest rates and other banking services.

Recovery Platform

The current issues the Albanian economy is faced with have not originated in Albania; therefore, their solution will to a large extent depend on the improvement of the economic activity at a global level.

The future development strategy will continue to depend on the essential factors elaborated in the first platform. Macroeconomic stability remains a fundamental precondition for ensuring a sustainable and long-term growth. Based on the lessons derived from the global crisis, the Bank of Albania considers that we need to be forward-looking and deepen structural reforms further. This constitutes the main condition for the stable convergence of Albania with the European Union.

Given the complexity of challenges we will be encountering in the period to follow, we consider the reformulation of current macroeconomic and financial policies, with a view to adapting them with the new settings, as imperative. Clear mechanisms need to be established in the future in order to co-ordinate the macroeconomic policies and the country's development programs. The Bank of Albania calls for the adoption of a quantitative and transparent fiscal rule, which serves as a condition for fiscal policies in the medium and long-run.

The tightened financial conditions in economy, the insufficiency of domestic resources and the turmoil in the international financial market call for new foreign financing resources. To this aim, any possible option, including the support programs from specialized international institutions, need to be considered. The Bank of Albania considers that Albania should benefit from the international fund created from the G20 summit, since it meets all the terms and conditions.

On behalf of the institution I represent, I would like to assure the Albanian Parliament, the banking system and all stakeholders that the Bank of Albania will meet the banking system's needs for liquidity. On the other side, we require from the banking system more independence from their parent banks in terms of the policies applied in the money market and investment portfolio. The Bank of Albania will further intensify the communication with the parent banks for the latter to financially support the subsidiaries operating in Albania.

Banks operating in Albania have been licensed to manage the savings of Albanian people. Consequently, the fundamental obligation of each banking system is the financial intermediation in the country it operates. To this aim, we will call for the recovery of credit to economy bringing to the system's attention the specific branches of production that are worthy of being financially supported.

The banking system should be more active in terms of restoring public confidence through constant communication and launch of new products to address the public reluctance.

The business community should be more open to the banking system. Enhanced openness and the necessity to be more forward-looking in the formulation of future business plans are two important conditions for restoring credit.

I would also like to address to the public at large. The way you behave each day determines the dynamics of the crisis' effects. The public should return to banks. If your behaviour is rational, the impact of the crisis will be only peripheral. By contrast, if your everyday behaviour displays any forms of unjustifiable panic, lack of confidence and withdrawal of deposits, then the possibility to be affected by the financial crisis becomes higher. Moreover, there is higher possibility that it turns into a real economy crisis. The financial system is the only specialized machinery' in possession of the information, know-how and human capacities to ensure the optimal allocation of financial resources in economy. Furthermore, the banking system is a regulated and supervised segment by the Bank of Albania, the authority whose main and exclusive objective is the preservation of macroeconomic and financial balances at home. To this aim, I believe time is ripe to respond rationally and with pronounced patriotism.

I would also like to extend my thanks to the media for the careful coverage of news in the recent months and encourage them to continue to do so.

I avails myself of the opportunity to address to the political class and call for increased attention to the challenges Albania will be faced with. The pursuit of a political understanding to address these challenges would reduce the negative impact on economy both in terms of time and intensity. We owe this to ourselves and to the future generations who deserve a more appropriate business environment, macroeconomic stability, a sound financial system and a clear convergence perspective with the Euro Zone.

The global crisis has now given us the first lessons. It teaches us that more discipline, communication, co-ordination, transparency and culture are required.

Dear deputies,

Macroeconomic stability at home has curbed the impact of the global economic and financial crisis on the Albanian economic activity. The stability expressed in the low consumer price inflation, balance of payments and public debt sustainability, sound economic agents' balance sheets, reduced financial market fluctuations and public confidence in the financial institutions is a great asset of the Albanian economy. It has been gained through work and sacrifice throughout the past years, therefore the Bank of Albania deems that we should pay utmost attention to its further safeguarding and consolidation even during these challenging times. The private sector's enthusiasm requires long-term and favourable economic and financial conditions as well as transparent competitive market structures. Only the countries knowing how to rise and respond to these shocks have managed to grow and prosper in the long run. Learning this lesson requires an explicit ranking of development priorities, the separation of long-term goals from short-term ones and the political willpower for their accomplishment. The energetic confrontation with the crisis' effects implies earlier recovery and fewer consequences. This would provide Albania with comparative advantages relative to the other economies in the region in the pursuit of fast integration and convergence with the European family.