Also, the Bank of Albania reviewed its regulation on the required reserves of banks, raising their flexibility in the manner of holding it and creating more opportunities in increasing the banking sector’s exposure to the economy. *** Another important aspect of the central bank’s functions is the banking system supervision and regulation, which contributed significantly to strengthening of the financial stability. In the following, I will focus on performance of some key indicators and banking system risks, as well as on the most important developments in supervision, licensing, legal and regulatory framework. 2. Banking supervision and financial stability  Banking sector assets to GDP accounted for 87.9% at end-2012, up by 3.1% on a year earlier. Profit improved, leading to improved indicators of Return on Average Assets (RoAA) and Return on Average Equity (RoAE). At end-2012, the banking system capital adequacy ratio was 16.2%, increased on a year earlier. At system level and for each individual bank, this indicator remained above the 12% minimum requirement. Supervision has aimed at assessing and monitoring the risks posed to the banking system. Special attention has been paid to monitoring the loan portfolio quality and the systemic risks stemming from lending, as well as to their actual or potential effects on the degree of banking system capitalisation. The banking system exposure to credit risk increased in 2012. The ratio of non-performing loans to total loans was 22.5% at year-end, from 18.8% a year earlier.

Also, the objectives under the IPA-2009 project on “Regional statistical cooperation programme for the Balkans countries” were successfully completed and project coordinators have commended the Bank of Albania. Other (research, human resources, communication and transparency, integration process) In addition to fulfilment of legal duties, the Bank of Albania is committed to attaining other objectives that help in completing a modern central bank’s role in economy. Bank of Albania intensified its research and academic activities in international arena during 2012. Worth of note is the 10th International Conference on “Monetary Policy: From the past to the present”, which was coordinated with other activities in the framework of the 100th anniversary of Albania’s Independence. Also, through the Institute of Economic Studies, we have promoted the broad interest of Albanian and foreign researchers, and have organised two regional workshops. Since some years ago, the Bank of Albania has put on focus of its development plan, the improvement of bridges of communication with the public and enhancement of transparency. During 2012, we continued to complete the published information and diversify it according to target audience. We built up contacts with the media and intensified our efforts in financial education, aiming to increase financial literacy and clearly transmit the Bank of Albania’s messages. The Bank of Albania was an active participant in fulfilment of obligations arising from the SAA, Central European Free Trade Agreement, and other national commitments. BIS central bankers’ speeches  5  International authorities have assessed the Bank of Albania’s work progress as positive.