PRESS RELEASE
Governor Sejko: Statement to the press conference on the Bank of Albania activity highlights in 2016 and its priorities for 2017

Dear media representatives,

As this press conference is the last one for 2016, I take this opportunity to briefly inform you and the Albanian public on some highlights in the activity of the Bank of Albania for the year just closing.

• Supervisory Council decisions

The Supervisory Council exercised its activity in 2016 in accordance with the powers set out in the law on the Bank of Albania and relevant bylaws.

In 2016, the Supervisory Council convened in 15 regular ordinary meetings. Of them, eight were dedicated to monetary policy decisions, divided in four quarterly and four intermediate monthly meetings. Four other meetings focused on issues related to banking supervision and financial stability, whereas the rest were dedicated to decisions on specific issues, of relevance to the work of the Bank of Albania.

The Supervisory Council approved 130 decisions, regulations, and instructions of general application; of them, 78 were approved for the first time and 52 consisted in amendments to existing acts.

Among them, notably the following:

a) Approval, for the first time, of the Policy for the Operational Risk Management at the institutional level and the establishment of the Operational Risk Management Unit;

b) Establishment and functioning of committees and specialised units, which enable the improvement of the management and control of financial values and physical assets of the Bank of Albania.

In addition, the Supervisory Council of the Bank of Albania has complied, in a timely and transparent manner, the obligation for accountability to the Assembly of the Republic of Albania. The Chairman of the Council, the Governor of the Bank of Albania, has participated in hearing sessions on specific issues, as per the request of Parliamentary Committees.

The Supervisory Council has paid special attention to the reports of the External Auditor, of the Inspector General and of the Supreme State Audit. In all the cases, these reports have been analysed by the Audit Committee, which has informed the Supervisory Council about the recommendations that have been left and the status of their implementation.

• Monetary policy during 2016

I would like again to underline that the Albanian economy, despite the challenging situation in our main trading partners, has shown clear signs of improvement throughout 2016.

Certainly, our accommodative monetary policy has played a primary role in this regard.

Our interventions - through the lowering of the policy rate, supply of the financial market with liquidity, or the forward guidance - have been provided at the due time and intensity. They served to calm the financial markets' pressure, enabled the reduction of financing costs at their historical minimum levels, contributed to accelerating the recovery of economic activity and to the return of the inflation' trajectory to the aimed track.

The Bank of Albania deems that its formulated and implemented monetary policy has provided a substantial contribution to supporting the sustainable and long-term development of Albania.

• Banking sector and its stability

During 2016, the banking sector continued to expand its activity, while its liquidity and capitalisation indicators remained at high levels and the financial result is positive.

I would like to emphasise that, thanks to the diligent implementation of the plan of measures on the reduction of non-performing loans, the level of non-performing loans appears as contained and the hedging of credit risk through provisioning is assessed as satisfactory.

To a large extent it reflects our conscientious work with regard to banking supervision. In parallel, the Bank of Albania has improved the legal and regulatory framework.

Let me now share in greater details our work in this aspect during 2016.

Inter-institutional plan for the reduction of non-performing loans

The inter-institutional plan, conceptualised in 2015, took a more complete shape in 2016.

First, through the approval of several regulatory amendments by the Supervisory Council of the Bank of Albania, there is now greater clarity related to the criteria and procedures for the loans write off from the banks' balance sheet, and the treatment of real estate taken into ownership. Additionally, these amendments facilitate the creation of a functional market of non-performing loans, as well as a faster identification of the information in the Credit Registry.

Second, the approval by the Assembly of the Republic of Albania of the legal package, related, amongst other things, to bankruptcy and execution processes, completed the second and most important pillar of this plan. The Bank of Albania evaluates that, the effects of the legal amendments, the experience gained by banks, the loss loan write off as well as the further recovery of the economy will create real stimuli for a gradual and sustainable decrease of non-performing loans.

Bill "On bank recovery and resolution in the Republic of Albania"

This bill is aimed at protecting the public interest in the case of a stressed situation of the financial sector, by avoiding the use of taxpayers' money. This is realized through structural changes, both binding and preliminary, and the creation of a fund with contributions from financial institutions, for a sole purpose: to cover funding needs in the event of a crisis.

I would like to emphasise that this is a preventive measure, which further strengthens security networks in Albania.

Law "On Savings and Loan associations and their Unions"

In the framework of endeavours for a more adequate regulation of savings and loan associations, in 2016 the Parliament adopted the new Law: "On Savings and Loan associations and their Unions"

The new law provides for a comprehensive regulation of all aspects of a SLA's activity, from the moment of its establishment and licensing until its dissolution and liquidation. Pursuant to the law, the Bank of Albania reviewed thoroughly the bylaws that regulated the functioning of SLAs and their Unions.

• Other activities

Special attention has been paid to the financial and material management of the institution. In March 2016, for the first time, we enabled the preparation and the approval of the Bank of Albania's financial statements in accordance with the International Financial Reporting Standards.

Throughout the past year, we continued to support and promote the use of electronic payment instruments. In the framework of the functioning of the National Payment System Committee and in cooperation with the World Bank, a number of projects are undertaken aimed at promoting the use of modern instruments and increasing the financial inclusion of the population, with a view to reducing the use of cash in the economy.

The Bank of Albania has intensified its work on aligning the methodology of financial statistics with international standards and harmonizing them with EU standards.

During 2016 the regulatory framework on the issuance of money and management of monetary values was further improved through the adoption of six new regulations, five guidelines and four manuals, of normative character. Beyond the more effective management of the processes in cash activity, the ultimate goal was to minimize the operational risks.

In 2016, the research contributed to the decision-making process of the Bank of Albania. Our research has been widely discussed in scientific activities of the Bank of Albania, which have stirred the interest of not only decision makers but also of the public as well.

With regard to information technology, in 2016 as number of processes was automated, notably the full integration of Bank of Albania's branches in its central systems.

Public's financial education is another aspect of our work. For 2016, activities in the field of economic and financial education included around 21 institutions and 13000 children, youth and teachers. The Museum of the Bank of Albania welcomed about 1,900 visitors.

• In the end,

I would like to underline that the Bank of Albania is prepared to start another challenging year. I am delighted to say that the Bank of Albania has the proper potential to contribute to the fulfilment of fundamental objectives for the further recovery of the economy, price control and guaranteeing financial stability. The Bank of Albania will continue to be a serious, transparent and a fully responsible partner with regard to the fulfilment of all legal obligations.

Concluding this statement, I would like to give a special thanks to all of you, representatives of the media, for the time, attention and the consideration to our communications with the press. The space you have dedicated for our statements has served to spread the Bank of Albania's messages to both economic agents and the public at large.

Therefore, on behalf of the Supervisory Council, I thank you for this valuable role!

Thank You!