Clearly, this trend reflects, at the same time, the lack of managerial knowledge and capacities in the Albanian economy, and the banks’ behaviour in terms of crediting. This has produced two negative consequences: it has failed to promote the growth of productivity and the improvement of the long-term growth pace of the domestic economy; and, it has restrained the diversification of the production base in the economy, limiting its resilience to various shocks. Second, a part of the credit portfolio, not quite insignificant, has been granted to borrowers who have been exposed to and unhedged against exchange rate volatility. These borrowers have often had limited and deficient knowledge on the exchange rate risk and have suffered the consequences. 3/5  BIS central bankers' speeches  Beyond macroeconomic aspects, the structural deficiencies of crediting are, in part, responsible for the rapid growth of non-performing loans in the post-financial crisis period. In this context, the Bank of Albania deems that the banking sector should: Expand the range of credit products, especially with regard to funding projects, so as to ensure a better coverage of the sectors of the Albanian economy and of the needs of borrowing households; Increase its attention to sectors that offer a high potential for returns, given the low usage of financial leverage, such as agriculture and innovative business start-ups in information technology; Supplement the range of financial products with derivative instruments for hedging against the exchange rate, especially for borrowers exposed to it. 3.

In addition, history and culture may play an important role. Perhaps, in view of recent history, German households are more savings-prone than others. Elsewhere in Northern Europe, private debt, and household debt in particular, has risen sharply in recent decades. Our part of the world became the champions of globalisation. We had the winning combination: highly educated labour, open economies with access to a large European market and, in Norway’s case, abundant natural resources. Our group of countries is characterised by solid government finances. Public debt has fallen through the entire period under consideration. At the same time, the countries in Northern Europe have amassed substantial financial assets, either in public or in private hands. Chart 4 Substantial wealth – different composition We often think that Norway really stands out, with its big sovereign wealth fund and substantial external assets. But along many dimensions we are actually fairly similar to our closest neighbours. Sweden, Denmark and the Netherlands also have considerable savings. In these countries, however, saving takes place in private pension funds. Throughout Northern Europe, pension savings entitle us all to a future income flow, whether this saving takes place in a public scheme or through compulsory pension agreements. The security this entails also enables households to bring forward a considerable portion of their consumption by borrowing, and to do so willingly. Together with solid income growth and low interest rates, this has fuelled a systematically faster rise in private debt levels than in income. Households with faith in the future borrow and invest.