Second, there is no doubt that financial globalisation has had positive effects on the efficiency of financial markets, on global risk-sharing and ultimately economic growth worldwide. That said, the current financial market turmoil also revealed a number of weaknesses in the globalised financial system, where tensions in one relatively small market segment in one country can rapidly spread across other markets and countries. One of the lessons to be learnt is that financial market integration across the globe needs to be accompanied by adequate appreciation of risk, effective risk management and sufficient market discipline. In addition, the episode has underscored the benefits of effective coordination and, if necessary, joint action by central banks, as well as closer cooperation and improved information-sharing between financial supervisors and central banks. Third, the experience of the ongoing market turmoil has highlighted the need to deepen our understanding of how globalisation affects the complex and multi-faceted nexus of monetary policy and financial stability. At this juncture, it is more important than ever that central banks continue to pursue their primary objective of price stability and effectively contribute to safeguarding financial stability and preserving confidence. Thank you very much. References Adalid, R. and C. Detken (2007), “Liquidity Shocks and Asset Price Boom/Bust Cycles”, European Central Bank Working Paper Series, No. 732. Barro, R. J. and X. Sala-i-Martin (1990), “World Real Interest Rates”, National Bureau of Economic Research Macroeconomics Annual, Vol. 5.

Thus, during 2010, the banking sector credit growth, albeit lower than in the pre-crisis period, was considerable, around 9%, while in some Central and South-Eastern European countries, it was negative. The deceleration of credit growth, which was initially driven by supply-side factors, is mostly a phenomenon attributed to the decline in the demand for loans. As a consequence of weaker expectations for activity development, businesses decreased their production capacity utilization, lowering investment objectives and the demand for loan. In spite of weathering the direct impact of the crisis, important challenges lay ahead of the banking sector and the Bank of Albania. First, the performance of credit quality should be monitored prudentially, aiming to timely identify non-performing loans, assess them correctly according to possibilities of their repayment and pursue proper policies, in order to recover the loan value within an appropriate time. Second, during this phase, it is necessary to strengthen the banks’ internal audit systems, not only related to credit risk but also to provide a higher standard of management. Third, banks should assess their expectations about the performance of their activity and take measures to strengthen their capital position in advance, in case of need. The Bank of Albania deems that in the periods ahead the Albanian banking sector and the economy need to determine and pursue more suitable development policies, which should include: setting realistic development objectives; setting more competitive prices for banking products and services; and increasing lending in the national currency.