Policies and measures for safeguarding financial stability and strengthening banking system’s resilience require all parties to continue the coordinated, inter-institutional and multi-dimensional efforts. Functioning of safe and efficient payment systems The Bank of Albania has dedicated particular attention to guaranteeing the security and efficiency of the core infrastructure of payments in lek, through its role as both operator as well as overseer and catalyst of the payment systems. Both systems operated by the Bank of Albania, the Albanian Interbank Payment AIPS) and Albanian Electronic Clearing House (AECH) have operated with no disruptions, efficiently and safely. In 2018, the Bank of Albania undertook a set of measures to further improve the legal and regulatory framework on the oversight of payment systems and payment instruments. The changes are aimed at adopting the European practices for promoting innovation in the field of payments and establishing premises for private initiatives. One of the main achievements on the improvement of the legal framework is the finalisation of the draft-law “On Payment Services” (PSD 2) which transposes the relevant EU Directive. Its approval and implementation will promote competition and innovation in retail payments, will enhance transparency of these services and will provide a framework on consumer’s protection. The National Payment System Committee (NPSC), which is chaired by the Bank of Albania and brings together public and private stakeholders in the field of payments, approved the Albanian National Retail Payments Strategy (2018–2023).

First one is about measures in the framework of increasing the use of the domestic currency as an instrument for increasing the effectiveness of economic policies and decreasing financial risks. In 2018, the Bank of Albania approved some regulatory amendments in this aspect: (i) decreasing the required reserve for deposits in lek and increasing the required reserve for foreign currency deposits, (ii) raising the required minimum level for the ratio of liquid assets to short-term liabilities in foreign currency, and (iii) setting out requirements to enhance transparency related to risks to the borrower in the case of foreign currency loans. Second one is about preparing the regulatory basis for setting up macro-prudential capital buffers, in accordance with best international standards and practices. Capital buffers mitigate cyclical and systemic risks in the banking activity, designed with a view to preventing a fast credit growth and build-up of indebtedness; restricting direct and indirect exposure concentration; and, restricting excessive risk in financial institutions. With regard to improving the supervisory processes, the Bank of Albania has worked for appraising internal risk assessment procedures, reviewing individual recovery and capital adequacy plans of banks; adapting the regulatory framework with the legal and regulatory acts of the European Union and Basel documents. Financial system monitoring has been supported by on-site inspections. In 2018, full-scope and partial examinations were carried out in 7 banks, 10 non-bank financial institutions, and 31 foreign exchange bureaus.