Therefore, all policymakers should work harder to improve the business climate, develop a new economic growth model, based on producing and exporting activities, and solve legal issues still present in the area of collateral execution. Once the monetary policy easing reinforces, the external setting improves, and optimism in the economy increases, we expect a fuller transmission of the monetary stimuli to the real economy during the current year. However, as proven by world practice, boosting lending cannot and should not be an issue of concern and scope of work only of the central bank. I would like now to elaborate on issues pertaining to banking supervision and financial stability. BIS central bankers’ speeches  3  3. Banking supervision and financial stability  The Law on the Bank of Albania sets out a series of rights and obligations, which serve to sustain the country’s financial stability. The Bank of Albania is responsible for licencing, regulating and supervising the activity of the banking sector, which dominates the financial system in Albania. By implementing macro-prudential policies, regulating and supervising the banking sector prudentially, playing the role of the “lender of last resort”, and regulating and overseeing the payments infrastructure, it aims at sustaining an effective and stable banking system, by providing direct contribution to maintaining the country’s financial stability. The legal framework also establishes the responsibility of the Bank of Albania to communicate its assessment on the financial system’s stability.

The latter is a prerequisite for the country’s economic and financial stability, and the Bank of Albania has accomplished its mission in this regard. However, our monetary stimulus was not transmitted in full to the real economy. As we have mentioned before, the monetary policy transmission mechanism faces problems, as a result of uncertainties of both the private sector and the banking system, for the future. In this framework, in March, the Bank of Albania adopted a package of measures to stimulate lending. In broad terms, these measures seek to: i) boost lending by reducing regulatory requirements for capital and liquidity; (ii) encourage intermediation in foreign currency by discouraging foreign currency activity abroad; and, (iii) promote credit restructuring to support businesses in temporary difficulties. Similar to other countries, where such measures have been taken, their success was partial. This fact shows that credit-related problems are very complex and, oftentimes, structural. Dwelling longer on credit-related problems, I would like to underline that its poor performance is a phenomenon that is present in all the European economies, including those of the region. This phenomenon reflects mostly the added prudence of large European banking groups against credit risk and poor economic performance. In this regard, the asset quality evaluation process by the European Central Bank, in June, will serve to give insight into the financial soundness of banking groups and may become a premise for a more positive attitude towards lending. In the domestic context, lending would benefit from the reduction of risk present in the Albanian economy.