Households, governments and banks in many advanced economies are still in deleveraging mode, and this attempt to reduce the debt overhang is likely to weigh on short-term growth prospects. Moreover, persistently high  8  Cf., e.g., Adrian and Shin (2009). 9  Cf., e.g., Miller et al (2002). 10  Cf. Tinbergen (1956). BIS central bankers’ speeches  5  unemployment rates and tight financial conditions continue to dampen consumption spending and business investment in several euro area countries. Against this background, the Swiss economy is expected to continue its expansion in the quarters to come. Available indicators hint at a fairly robust second term in 2013. For instance, monthly data show that exports are gaining momentum, driven by the strengthening of foreign demand. For 2013, we expect the Swiss economy to grow between 1.5% and 2%. Despite this moderately optimistic outlook, we must be aware that downside risks remain substantial. Let me name three: first, structural problems in Europe persist, and could cause new market tensions. In particular, the European banking system remains vulnerable. Second, a negative fiscal shock in the US in early 2014, caused, for instance, by renewed political deadlock over public budget negotiations, would probably be a drag on the global economy. Third, adjustments of the monetary policy stance in one area (e.g. the US) may create undesired spillovers in other regions (e.g. emerging markets or Europe). This could lead to increased volatility in financial markets. What does this economic outlook imply for the likely evolution of interest rates?

The revision of the supervisory methodology on the qualitative assessment of the corporate governance in banks, of the functioning and independence of their committees, of the internal audit structure in assessing the risks and their functioning continued during 2017. In this project, we partnered with the European Bank for Reconstruction and Development. Notwithstanding the progress made in reducing the non-performing loans, attention has been paid to the achievement of banks’ annual objectives regarding the situation of non-performing loans and the compilation of the Recovery and Resolution Plans for larger borrowers. Banks report regularly to the Bank of Albania on the level of their relationships with every borrower, as well as the expectations and plans on future developments, in compliance with our requirements. With assistance from the World Bank and the International Monetary Fund, a regulatory framework, aiming to encourage the collaboration and coordination of banks for addressing common borrowers, is being compiled. Special attention is being paid to the consolidating processes with the expected merger of two banks in Albania and the strategic plans on the re-positioning in the market depending on the dominant short and long-term factors. In parallel with the work to improve the regulatory framework and the adoption of the best international standards, high priority has been given to on-site examinations. During 2017, fourteen full-scope and partial examinations were performed in banks, non-bank financial institutions, and savings and loan associations.