Prudential regulations have been tightened in response to rapid credit growth and intensified competition in the banking system. We are working to ensure proper supervision over the parts of the Albanian financial sector that are outside the Bank of Albania’s jurisdiction, while trying to preserve fair competition across the sector. The Bank of Albania is assisting the MoF to improve its debt-management capacities. I believe our hard work will be reflected in a satisfactory rating of our sovereign debt, due to be carried out early next year. The competence, credibility and professionalism of our monetary policy provide necessary conditions to support and guarantee achievement of economic goals and successfully fulfill economic convergence toward ERM II preconditions. However, our achievements will not last in the absence of a careful fiscal policy and conservative fiscal expansion. The Bank of Albania is not the only major economic player. Therefore, we must find and implement clear anchors to guarantee the compliance of other players’ economic policies. In this respect, we can transform ERM II preconditions into an important foreign anchor to preserve the credibility of our reforms in the future. As a pre-accession country, Albania will be facing ERM II problems in the medium term. We are well aware of the difficult road ahead and the challenges we will face. Nevertheless, we remain committed toward economic and legal reforms considering it as a natural approach toward EU accession process. ***  BIS Review 1/2007  3  References Begg, B., Einchengreen, B., Halpern, L., Hagen, J. Wyplosz, CH. (2002).

-  On the policy side, it is striving to maintain monetary conditions in line with the Maastricht Criteria. In this respect, Bank of Albania is carefully considering all available alternatives of monetary policy regimes, among which priority is given to fully fledged inflation targeting strategy. This framework will provide a more sophisticated approach to decision-making and will create a better platform for communicating our commitment to price stability, ultimately leading to a better anchoring of inflation expectations. However, the choice of the new regime will be a conditional decision based upon results of current ongoing research, evaluation of the preconditions and building up of capacities. To this end, we are carefully refining our technical capacities and decision-making processes, following the necessary preconditions, working to achieve real independence for the monetary policy, upgrading our analytical capacities and designing appropriate internal processes. -  On the structural side, the Bank of Albania is also pushing the reform agenda in the financial sector. The reform agenda in the Albanian financial sector aims at gradual implementation of the Acquis Communnautaire standards in banking legislation. We are revising the legal infrastructure. In this regard, a new Draft Banking Law is prepared by the Bank of Albania; likewise a new Law on Securities will be introduced shortly. In addition, efforts are underway to revise legislation on Pension and Investment Funds, and draft a Law on the Payments Systems, which will substitute several sublegal acts issued by the Bank of Albania until now.