Alongside the SMR and SIMR, there are also new remuneration codes. CRDIV sets a cap on the proportion of variable pay for bankers. There is a risk that this will simply increase the fixed element of pay, making it harder to adjust pay in the light of performance. The UK’s approach nevertheless has to reflect those rules. In addition, the UK has provided for firms to defer elements of pay for up to 7 years – and a further 3 years if conduct investigations are still ongoing. Firms will be able to apply “malus” to variable pay which has been deferred and not yet vested. So if misconduct is discovered or risk-taking turns out to have negative medium-term consequences, the firm can subsequently withhold those deferred elements of remuneration. The UK code also provides for the possibility of clawback of pay that has been vested. There has also been misconduct discovered in markets that were not previously subject to regulation, such in the setting of LIBOR or behaviour around foreign exchange fixes. The setting of major financial market benchmarks has now been brought within the regulatory perimeter. And the Bank of England, FCA and HMT conducted the Fair and Effective  10  PRA CP18/15, May 2015. Corporate Governance: Board Responsibilities’. 11  Parliamentary Commission on Banking Standards, June 2013. “Changing Banking for Good”. 10  BIS central bankers’ speeches  Markets Review12 which has made a series of recommendations to improve conduct and the functioning of markets going forward.

However, I would like to briefly address an aspect of macroeconomic and institutional framework, which has been an important determinant of the extent and magnitude of the national authorities’ response to the crises: the exchange rate regime. A quick glance at the current developments in the region and broader allows us to draw the conclusion that the countries adopting a fixed exchange rate regime have been affected by the global crisis proportionally higher. Moreover, they have been more constrained in terms of responding to the crisis. By contrast, countries adopting a free floating exchange rate regime have been affected by the crisis more mildly and smoothly, and they have preserved higher independence in their economic policies for the mitigation of crisis effects. Obviously, this is not occasional: the free floating exchange rate regime is an important political, economic and institutional investment of emerging countries. Their sacrifices in terms of building reliable monetary and fiscal policies, enhancing public confidence in the respective currencies and national financial institutions are rewarded with the flexibility this regime provides to macroeconomic policies in coping with the crises. Exchange rate volatility mechanism is precisely a mechanism that allows the economy to absorb various shocks. The free floating exchange rate regime, devotedly adopted by the Bank of Albania, allows the Albanian economy to withstand these shocks at minimum cost. Let us leave this mechanism operate smoothly, without excessive reactions from the market or its agents. Any smooth moves towards the exchange rate equilibrium will be in the Albanian economy’s own interest.