Financial performance has been good, recording average levels of return on equity and on assets, respectively over 20 per cent and 1.5 per cent. Over the years, the banking system has chosen to capitalise the majority of its profit in order to best support its activity with liquidity and capital. During this period of a rapid and qualitatively better expansion of the banking activity, the Bank of Albania found it necessary to revise the supervision philosophy. The main ambition was its orientation towards sources of risk, in other words to strengthen control over banking activity. For that reason, at the end of 2006 a new law “On Banks” was adopted. This law imposed, on the banking industry, more contemporary standards as regards realisation, direction, and control of the banking activity. The main concerns consisted in high crediting levels, significant concentration of crediting in foreign currency, and the absence of sectorial diversification. Consequently, at the end of 2006, the Bank of Albania introduced a number of regulatory amendments aiming at slowing down crediting growth levels, through imposing higher capital requirements on more aggressive banks. These measures were further supplemented in 2008, targeting more directly cases when borrowers had no income in foreign currency. Another strategic move during this period was integration of banking supervision and financial stability with monetary policy decision-making. This action is as bold as it is innovative in establishing more optimum equilibriums between our function of drafting and implementing the monetary policy and that of maintaining the system’s financial stability.

Ardian Fullani: Analysis of economic and financial developments in Albania Speech by Mr Ardian Fullani, Governor of the Bank of Albania, at the 24th Conference of Banking Supervisors from Central and Eastern Europe, Tirana, 12 April 2011. *  *  *  Distinguished ladies and gentlemen, Allow me to first wish you a warm welcome in the 24th conference of banking supervisors from Central and Eastern Europe, which this time is taking place in Tirana. The Bank of Albania considers this forum as very important and a platform where participants may exchange their institutions experiences with each-other. This forum is a modern highway that allows for a rapid convergence of our supervision practices with the best standards. Let me now continue with a summarised analysis of economic and financial developments in Albania over the last two years, focusing on some concrete issues requiring more attention by the banking industry and the supervisory authority in the future. The Albanian economy was characterised by positive developments during the pre-crisis period. Annual economic growth was on average 6 per cent, with admirable and stable core macroeconomic indicators. Growth relied on a firm strengthening of internal demand components while funded by internal resources, mainly through rapidly increasing loans to the private sector and loans for investments. The banking sector, which dominates the domestic financial system, has also undergone a significant transformation in recent years. This is due to the entrance in the market of renowned European banking groups, expansion of banking infrastructure and upgrade of customer services.