To ensure a sound banking system, the Bank of Albania is mandated to supervise and regulate the activity of banks and institutions conducting banking activity.
The Bank of Albania formulates rules, on the establishment of banks and institutions operating as banks, and licenses their activity. The Bank of Albania supervises and monitors the activity of these institutions, to ensure that they comply with the applicable laws and regulations.
The Bank of Albania ensures the activity in the interest of banks' public, by dealing with the applications in cases when a bank requires acquiring another bank or conducting non-banking activity. In establishing such rules, the Bank considers the fact that such transactions impact on the competitiveness and public interest, ensuring that these clients are equally and fairly treated.
Another way how the Bank of Albania helps in establishing a sound banking system is its function as the "lender of last resort". Thus, a bank or financial institution that has high deposit withdrawals by the clients, can borrow from the Bank of Albania when it fails to provide loans from other banks. This loan extended by the Bank of Albania does not only help the bank overcome the temporary difficulties it is faced with, but what is more important, it does not allow the problems to spread from one bank to another. The interest rate applied in these cases is referred to as the "Lombard loan rate".