Corporate debt shows a similar pattern, increasing along with economic activity, without any widespread deterioration of financial indicators. Thus, it is our view that the Chilean financial system has not suffered any material increase of its systemic vulnerabilities. BIS central bankers’ speeches  5  However, our Financial Stability Report also identifies some elements that might be sources of risk and that must be closely monitored. The construction and real estate sector has been strong lately. Activity in the real estate market has had stronger sales as a counterpart, for both housing and commercial use. While the vacancy rate in the commercial sector has remained low, the expected substantial expansion of supply and its inertia, especially in top-quality offices, is one factor that must be monitored closely given the risk scenarios facing economic activity. The evaluation of any new project should take this element into consideration. In the same token, aggregate housing prices have evolved in line with the economy’s level of interest rates and income. However, at some higher-priced districts, prices are still outgrowing their historic trends, possibly due to limited land available. It is important to keep in mind that the materialization of negative risk scenarios could lead to a breakdown in current price trends. The potential implications of this are price adjustments influencing the returns of executed projects and, additionally, the collaterals backing mortgage loans. With respect to household debt, two factors deserve careful attention. One is its rate of expansion.

2)  Banking law  Many amendments to the law on the financial system have been made over these years. These amendments resulted from the need of adopting the European Directives in this area and the Basel core principles for an effective banking supervision. This process was successfully finalized upon the approval of Law No. 9662 “On Banks in the Republic of Albania” by the Parliament. Compared with the previous law, the new law is more complete and more accurate in some parts of it. It has integrated some new concepts which are in full compliance with the European Directive 83/349 and other important directives. It stipulates changes in the licensing of activities by level of capital, in consolidated supervision, etc. In addition, “risk management”, which previously was provided for in specific regulations, has been now summarized in a specific chapter of this law. 3)  Foreign direct investments and the Albanian financial system  Foreign direct investments have been assessed as very important for developing countries, since they have a positive impact on the macroeconomic, technological and institutional performance of recipient countries. The wide experience over the last decades indicates that the presence of the financial FDIs improves the soundness of the domestic financial system, through a better management of portfolio risk and a more efficient allocation of credit funds. In addition, the technological innovations deriving from the FDI inflows affect the enhancement of the banking system competition and efficiency, through the increase in the variety of products and services provided.