As a result, in Albania we have increased our efforts to restructure the economy. The BoA has also sought to increase transparency in the banking system and to strengthen its balance sheets, both through capital increases and through tackling bad loans. The latter has been done through promoting credit restructuring or credit write-offs. In this regards the focus of bank of Albania will include a micro-approach in analyzing the bad debtors of systemic importance. •  International cooperation is a prerequisite for mitigating contagion effects and for successful crisis management. Particularly, the Vienna Initiative has been instrumental in limiting the deleveraging process of the private banking system in our economies. •  Safety nets have to be improved, in order to make them more efficient and sustainable. Several issues remain to be solved. SEE economies have rightly chosen integration in EU as their main goal. It helps to anchor their political systems, their structural reforms, their legal and regulatory environment and their macroeconomic and financial policies. However, the economic growth model has to change. The main focus of national authorities in SEE should be to facilitate the allocation of capital to more productive sectors, by providing the right incentives structural reforms, legal environment, tax policies, and economic stability. In the financial system of these countries, dominated by banks, the deleveraging process is undergoing under the pressure of the deteriorating loan quality. Credit is made scarce as banks have become risk averse and hesitate to lend to potential borrowers by tightening lending terms.

In the last 3 years, there has been significant progress in the identification of several instruments designed: •  to address the rapid expansion and concentration in lending activity;  •  to ensure that banks have sufficient liquidity to cope with different shocks;  •  and to discourage risky behavior by financial institutions by increasing demand for capital for such activities. These measures may have countercyclical nature and could apply to financial institutions based on their systemic importance. These standards require building an institutional framework with clear identification of the authority /authorities that will have macro-prudential powers, in accordance with the structure  BIS central bankers’ speeches  1  and level of market development. Central bank appears to be better positioned than other authorities to perform the macro-prudential role. In addition to its exclusive responsibility on formulating and implementing monetary policy, central bank has other advantages related with: •  its involvement in developing the payments systems infrastructure;  •  its access to wide market and financial system data;  •  and, many times, its role as a regulator and supervisor of banks. Nowadays it is widely accepted that there has been huge progress worldwide in ensuring legal and operational independence of the central bank and this is another important reason why it can be entrusted with macro-prudential policy. In order to correctly define the macro-prudential function of the central bank, it is important to establish the right relationship with monetary policy.