Publication Date 20.12.2017
In this last conference for 2017, I would like to present some highlights in the activity of the Bank of Albania for 2017, focusing on our priorities.
I will start with the
activity of the Supervisory Council of the Bank of Albania.
In accordance with our published schedule, the Council met 15 times during 2017. In total 69 decisions have been made, of which 53 were acts approved for the first time and 16 were amendments or additions to existing acts.
In eight meetings, the Supervisory Council analysed economic and financial developments in Albania, followed by the approval of the respective monetary policy reports and the decisions on the monetary policy stance in general and the policy rate in particular. In all the cases, the decisions have been explained in press statements and the periodic monetary reports have been sent to the Parliament and all the other interested foreign and domestic stakeholders. For the general public, they were published on the official webpage of the Bank of Albania
Another important product in the activity of the Supervisory Council of the Bank of Albania were the decisions dedicated to further strengthening banking supervision and guaranteeing financial stability. In this regard, I would like to mention the establishment of the Resolution Department, the approval of the Macro-prudential Policy Strategy, and the approval of two half-yearly financial stability reports.
The Supervisory Council has also paid attention to monitoring the administrative and financial activity of the Bank. In addition to approving the annual report and the financial statements, which in the framework of accountability have been sent to the Parliament and are made public, the Council has paid particular attention to the reports by the External Auditor, the Inspector General and the Supreme State Audit institution, as well as the duties left in the relevant resolution by the Parliament. On the other hand, throughout the year, the Audit Committee has analysed on regular basis the findings and conclusions of the internal and external auditing.
Lastly, I would like to emphasise that the Supervisory Council has paid particular attention to strengthening the institutional capacities of the Bank, by further improving the operational procedures, as well as support for professional capacity building and staff motivation.
monetary policy, we have informed you in detail about our analysis and relevant decisions. I would like to also iterate that the accommodative monetary policy stance of the Bank of Albania has played an important role in supporting the recovery of economic activity in Albania. Our decisions have been made in due time and intensity, contributing to the reduction of the costs of financing and the normal functioning of financial markets.
During the year, we worked to further improve the forecast instruments and methodologies and perfect the process of
monetary policy implementation. The latter was realised by standardising the practices for the management of banking system liquidity, technological improvements in the REPO auctions, and weekly publication of projections for the amount of the liquidity in the system. An important development is the expansion and deepening of the government securities market, by providing access for direct participation for all non-resident financial institutions. Another achievement in our activity is the management of the foreign exchange reserve. Irrespective of the difficult environment for the investors in the euro area, characterised by low and often negative interest rates, we have managed to maintain a positive yield for the foreign exchange reserve, while complying with all the limits, rules and procedures for the investment risk management.
banking supervision and guaranteeing
financial system stability of the system remain one of the fundamental objectives in the Bank of Albania's activity. In 2017, the law “On bank resolution in the Republic of Albania” entered into force, which determines the Bank of Albania as the Resolution Authority in Albania. Pursuant to the legal obligations, the Bank of Albania established the “Resolution Fund” which will receive regular annual contributions by the banks. The Fund will serve to realise resolutions, in all the cases when the need arises for an early restructuring of banks facing difficulties and covering the needs for financing in the event of crisis, by the banks.
Another prominent development in 2017 is the constant decline in the non-performing loan ratio. In November, the non-performing loans stood at only 14.3% to total loans, from 18.23% at the end of 2016. The improvement reflects the measures taken in the context of the national plan for the reduction of non-performing loans, as well as other measures. In this year, we intensified our communication with the banks; in parallel, with assistance from our international partners, we adopted and implemented some of the best international practices and experiences.
In August, the Supervisory Council approved the Macro-prudential Policy Strategy, an important document for guaranteeing financial stability. The Strategy details all the objectives, instruments, indicators, including the relevant structures, at and outside the Bank of Albania, responsible for safeguarding financial stability. This policy is a roadmap for the steps that the authorities need to undertake, for the management of risks to financial stability.
Another strategic engagement is related to the higher use of the national currency in the Albanian financial system and economy, in other words the de-euroisation. In 2017, in consultation with the banking industry, we designed some specific measures that will enter into force in the first half of 2018. To make de-euorisation a comprehensive process, the Bank of Albania signed a Memorandum of Understanding with the Ministry of Finance and Economy and the Albanian Financial Supervision Authority, for similar measures to be taken also in the rest of the financial system and in the real economy. This initiative is expected to result very soon in concrete additional measures.
The supervision, regulation and licencing for the banking system has continued to be among the important priorities in our activity. The Bank of Albania conducted around 14 inspections in 2017. In addition, the transfer of 100% of holdings of Veneto Banka sh.a. to Banka Intesa Sanpaolo S.p.A., Italy and 3 non-bank financial institutions were licenced to conduct payment services and money transfers, and financial leasing and microcredit activities.
We continued in 2017 to approximation the supervisory and regulatory framework with the European directives and the standards of the Basel Committee. In May, the Guideline
“On the internal assessment of the capital adequacy”, in accordance with Pillar 2 of Basel II. We also revised some regulations on (i) consolidated supervision, (ii) effective management of banks and criteria for the approval of their administrators, (iii) anti-money laundering and combating the financing of terrorism, and (iv) transparency on banking and financial services. As a result of the intensification of our cooperation efforts with European regulatory authorities, a bilateral cooperation agreement is expected to be signed at the beginning of 2018 with the European Central Bank.
The work of the other units of the Bank of Albania is equally important and completes the map Bank of Albania’s activities in 2017.
Let me focus only on some of them:
In view of our efforts for improving the
financial and material management of the institution, the Bank of Albania has completed the preparatory work for the application of a new accounting standard. The new IFRS 9 standard will enter into force on 1 January 2018.
The Bank of Albania has made progress in terms of drafting the necessary primary legislation on
payment services in Albania, in accordance with the relevant EU Directive, as well as to promote the channelling of remittances in the financial system. These projects aim at reducing the costs for transferring remittances through the financial system and increasing the financial inclusion of the public. To enhance institutional cooperation and coordination for an even more effective contribution of remittances to economic development in Albania, in December, the Bank of Albania, the Minister of State for the Diaspora and the Ministry of Finance and Economy signed a Memorandum of Understanding on Remittances.
Research has been and remains an important aspect of our work. It aims to provide decision makers, at the Bank of Albania as well as other institutions, with the appropriate theoretical tools to interpret economic and monetary phenomena and identify and quantify their correlation. In accordance with the established tradition, the Bank of Albania, in cooperation with the South East European Studies at Oxford, held the annual conference: “Banking developments and financial market infrastructure. The role of structure, size and market infrastructure in risks mitigation and financial market” The presentations in this conference shed light on the latest trends in financial sector development, focusing on potential effects on the macroeconomic equilibrium and financial stability. In addition, we organised the 11th South-Eastern European Economic Research Workshop. Researchers from the region and renowned international institutions discussed the conclusions of their analyses on various aspects of economic and financial development in their countries and in the region in general.
Our educational work continued with a number of projects implemented to promote financial education in order to learn more about and better manage personal finance. Financial education is realised through programmes, activities and dedicated educational publications focusing on the central bank, its role and functions as well as on promoting financial literacy in the Albanian society. An important tool for interacting with the public, the Museum of the Bank of Albania has turned the Bank of Albania into the house of the currency for many visitors. For the first time, we celebrated the International Museum Day and organised an event on “Interesting facts from the Treasury: The Art of the Albanian Banknote ".
In the aspect of
currency issue, in addition to the added prudence related to its routine activity, the current banknote series were revised to improve them in terms of functionality, design and security features.
The Bank of Albania has intensified its work on methodological alignment of
financial statistics with the international standards and their harmonization with EU standards. In line with the transparency principles and the long-term strategic objectives of the Bank, this year we prepared the Code of Practice on statistics at the Bank of Albania. Since June, Albania has been implementing the IMF’s Enhanced General Data Dissemination System.
information technology, the Bank of Albania has completed a number of important projects and others are in the final stage, among others: adjustment of the AFISAR system to include non-residents in the securities registry, and improvement to the online regulatory reporting by the banking system to the Bank of Albania. The Bank of Albania has paid attention to the constant improvement of security in the field of information technology to guaranty business continuity and integrity.
The tradition of
open communication with the public continued in 2017. Institutional transparency and involvement of various stakeholders are at the centre of our communication. Through 120 speeches, press releases and interviews, 40 reports, analyses and bulletins, various statistics and data, 3 conferences and a series of other activities we fulfilled our obligation for transparency and accountability to the public. To promote interaction with the public, in 2017, we introduced the digital communication through social networks to present the general activities of the Bank of Albania to the public, in a timely and comprehensive manner.
The Bank of Albania has also paid attention to
fostering cooperation with partner agencies and institutions. In this context, in 2017, we constantly exchanged opinions with institutions such as the IMF, the World Bank, the European Central Bank, and the European Commission, and several joint activities were also organised. In addition, we launched initiatives with a potential positive impact on the Albanian economy and finances. The Bank of Albania signed also a Memorandum of Cooperation with the Central Bank of the Republic of Turkey. The Memorandum aims at fostering cooperation between the two central banks, through information exchange, expertise, research, and regular dialogue at technical and policy-making level. It is an important step with regard to using the opportunities provided by the economic, financial and technological integration and strengthening the resilience to challenges that accompany it.
Concluding, I would like to underline that in 2017, the Bank of Albania made further steps forward for accomplishing the strategic objective to approximate our central bank model to that of the European System of Central Banks. Progress has been made across the board and proportionally, which enhances our confidence that the Bank is fully prepared to face another challenging year. Knowing at first hand the spirit and seriousness that characterises the Bank of Albania, I am optimistic that we will successfully accomplish our mission to guarantee macroeconomic and financial stability, as a necessary condition for supporting sustainable economic growth for Albania in the years ahead.