These improvements were dictated by the need to adjust to and implement the European directives in this are, and the Basel principles for an effective supervision. Other activities of the Bank of Albania During 2004 the legal status of the Bank of Albania remained unchanged. Meanwhile, the revising of the Law “On Banking System in the Republic of Albania” started with the purpose to further perfect the legal framework of commercial banks’ activity in accordance with the aspirations of our country for membership in the European Union. BIS Review 38/2005  7  Also, during the last autumn the Bank of Albania regenerated most of its Supervisory Council (7 members) and new administrators of the institution were elected. This process did not impact on normal flowing of the Bank’s activity, indicating the consolidation of this institution. During 2004 the inter-institutional cooperation was another feature characterizing the Bank of Albania performance. In this aspect, we have been open and ready to design and implement the country’s development programs, to advise the Albanian executive on various economic issues and we have participated actively in all tables of negotiations with the international factor. In view of meeting the objectives and obligations deriving from the agreements between Albanian authorities and international institutions, during 2004 the Bank of Albania closely cooperated with the latter ones. In the framework of consultations on assessing the fulfilment of obligations deriving from the agreement between Albanian authorities and the IMF, Albania was visited by three monitoring missions of the IMF.

According to assessments made by the Bank of Albania, there exist some long-term factors whose operation has influenced on appreciating the Lek’s value: •  Constant consolidation of the country’s economic stability. •  Interest rate spread between the Lek and the foreign currencies. •  Consolidation of public finances and budget deficit, dictating a low government demand for monetary assets. •  Stable remittances by Albanian emigrants working abroad. In the meantime, during 2004 the exchange rate performance was also impacted by specific factors of the year. Specific factors relate to starting of tourism earlier than in the previous years, rise of agricultural produce and decline of demand for agricultural merchandise imports, impacting on the supply and demand for foreign currency in terms of the Lek appreciation. Also, the international foreign exchange market developments are reflected in our foreign exchange market. The euro appreciation versus the dollar over more than a year is reflected in the reduction of the dollar’s value even in our country, though no strengthening of the euro is observed. During 2004, the dollar was depreciated by 7.5 percent against the euro in the international market. During 2004, the Bank of Albania intervened in the foreign exchange market in terms of purchasing foreign currency, in an effort to prevent large exchange rate fluctuations reflected mainly during the summer and end-year period. Financial markets Growth of deposits in Lek, in the presence of a low government demand for monetary assets, created premises for increasing banks’ liquidity and extending interbank market activity.