Using the parlance of the profession, the “bail-out” (or rescue of the bank with public funds) disappears and is replaced by the “bailin” (generation of own funds, capable of absorbing losses, converting debt instruments into capital). 3/10  The internationally agreed principles have been passed through to European regulations through the Bank Recovery and Resolution Directive (BRRD). This framework has been completed within the Banking Union with the establishment of the Single Resolution Mechanism, a system comprising a central authority, the Single Resolution Board (SRB) – which adopts the relevant decisions for significant banking institutions – and the national resolution authorities that participate in the SRB and retain direct responsibility for the less significant institutions. This Mechanism has a Single Resolution Fund, endowed with contributions from the industry, that will enable financial support to be afforded to resolution processes. Despite the undeniable progress that the new resolution framework adopted in Europe entails, its practical implementation is subject to major challenges that I would like to highlight today, drawing on the fact that the BRRD will shortly be revised on the basis of a recently submitted legislative proposal by the European Commission. Accordingly, I shall first refer to the general aspects of the European resolution regulations. Next, I shall look at the loss-absorption requirements for bank creditors, which is one of the central aspects of the regulations. And I will conclude with some brief comments of a more strategic nature.

Despite last year’s narrowing current deficit, Albania’s external position remains a constant structural weakness. The Albanian banking system is considered to have adapted commendably to this complex situation. I would like to underline that we have done an immense amount of work so far. Therefore, I take this opportunity to congratulate all central and local managing units of banks operating in Albania. During this period, the Albanian banking system has continued to expand its activity and lending to the economy. Financial soundness and profitability indicators have improved and system’s activity capitalization is in a good position. The banking sector remains the main actor of financial intermediation in Albania, whose financing continues to rely mainly on public deposits. The main problem of the banking system has been the growing non-performing loans share, which has also reflected the active policy of the Bank of Albania to enhance the transparency of banks’ balance sheets. Credit risk remains the primary risk to our banking sector. In response, the banking sector has established adequate reserve funds to buffer major shocks on the borrowers repayment capacity and market equilibrium. Stress tests support our conclusion on banking system resilience. The presence in this room of both the business community and the banking system suggests me to refer once again to the need for sincere cooperation of mutual benefit. With a few exceptions, I think this cooperation has been present and operational and has certainly supported in particular the country’s economic activity over the past years.