Crediting should be supported better through a solid growth of funding sources, especially deposits. In crediting, it is necessary to have a better sectorial distribution and a more reasonable balance among public and private investment projects, Albanian Lek or foreign currency denominated credits, therefore orienting crediting towards supporting the national economy. BIS central bankers’ speeches  3  In this context, there is sufficient room for banks to support more crediting to small and medium enterprises and provide more opportunities in Lek crediting. In any case, the process of analysis, assessment, follow up and evidencing the credit quality should be pivotal to relevant structures in banks and should be carried out with maximum seriousness and commitment, conform to supervisory requirements. In this process, cooperation is needed with clients that are facing temporary difficulties. However, in the case of non-performing loans, it is necessary to undertake envisaged and timely actions to execute the guarantees and other forms of collateral, in order to recover maximum values. These actions are important while the Bank of Albania deems that the crediting activity of the banking sector will continue to face a challenging environment and targeted improvements for the credit quality will require more time to be realised. In conclusion, let me underline that, movement in the above-mentioned directions make a complex process which requires a two-way commitment and cooperation. It is with pleasure that I find that cooperation between us and the banking sector is seeing progress, both in field of supervision and monetary policy implementation.

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.