Moreover, latest developments in banking and financial markets might foster additional risk factors related to asymmetric exposure, issues of home host supervision and financial safety net with foreign banks dominance. These challenges and the expected financial developments in the region will outline the scope and the structure of reforms in the future. So, please allow me to briefly present my view on the future trends of regional financial markets. Financial markets in the region are becoming part of broader global developments which fuels financial integration, liberalization, and financial innovation. The lucrative regional market and the consolidation process have imposed a vertical financial integration in the region. Less than ten European banks with headquarters in Vienna, Athens or Milan dominate the regional banking markets. The process of financial integration will continue, making the region more and more integrated to the European Countries. Financial systems are leading the road to financial integration and the positive spillovers of such process will spread over. Financial markets are and will continue to be bank dominated. Non banking financial sector will grow very rapidly, but banks will continue to be the major players. They will help to further build the needed  BIS Review 121/2006  1  financial infrastructure for nonbanking financial activities, and support growth in our economies. Not long ago I asked a friend of mine who had recently returned from migration after 15 years: “Why did you come back”?

Such reforms have ripple effects that go beyond economic benefit of a long run stable growth and financial stability. I believe that positive spillovers will be materialized in the South East European region’s prosperity and its economic and political integration in European Union. The Bank of Albania has been a constant generator and supporter of reforms both institutionally and as the provider of stable prices, sound macroeconomic conditions and financial stability. It makes an undeniable fact that financial integration which we are experiencing will be to the forefront of European Union integration process. It will ease the challenges and speed up the process of European integration which Albanians have embraced by wide popular consent. Like in many other transition economies banking reforms in Albania were implemented as an integral part of the structural reforms undertaken to transform the Albanian economy in a market oriented economy. Continuous improvement, along with approval and implementation of new banking legislation and supervisory regulation; liquidation and privatization process of the state owned banks; and foreign ownership; have change banking and financial markets. Foreign banks have been an important push factor toward increasing efficiency, number, quality, and coverage of financial intermediation. New entries, mergers and acquisitions are recently altering the market structure in both asset and liabilities. Reforms that brought big European players and their capital in the market, have further increased confidence in our economy and in the region as whole. However, the presence of foreign banks does not replace the need for legal and institutional framework.