This is an expanded definition to cater for the operational needs of private banks. Once we have defined who qualifies as a “Private Banking Customer”, the next step is to consider specific measures that would help make private banking more “user friendly” without compromising the need to accord appropriate protection to private banking customers. First of all, let’s talk about suitability assessment. The HKMA agrees that private banks need not mechanically match their client’s overall risk tolerance level to product risk level. This is because in private banking, customers often look to their private bankers for investment advice on a continuous basis having regard to the customers’ entire portfolios or balance sheets. This is quite different from the retail end of the market in which one-off sales transactions are common. We therefore consider that suitability assessment for private banking customers can be conducted on a holistic or portfolio basis, taking into account all the relevant circumstances of the customers. For example, as long as the portfolio allocation and the overall risk level agreed with the client is adhered to, a low or medium risk tolerance client buying high risk products that only constitute a minor proportion of his portfolio is not necessarily a “mismatch”. The same principle applies to some other aspects like investment tenor and concentration risk of AUM with any individual private bank because the entire portfolio of the customer will be taken into account. Also, we agree that the documentation of rationale for recommendations need not be on a per transaction basis.

Concerning the macroeconomic aspect, a number of factors contributed to inflation at this period, with various degrees of intensity and opposite directions of action. Upward inflation pressures were generated mostly by conjunctures of raw material and primary commodity  BIS central bankers’ speeches  1  prices in international markets. Imported inflation was transmitted directly to increased consumer goods prices in Albania. It exercised additional pressures on production costs and inflation expectations, but these second-round effects remained controlled. Furthermore, the negative output gap continued to exercise downward pressures on prices balancing, in part, the effect of foreign price increase. The expansion of economic activity continues to be below the potential of the economy, leaving unutilized capacities in the labour and capital markets. Under these conditions, inflationary pressures from the real sector of the economy remain controlled. This is reflected also on the base inflation performance, which, although upward, remains anchored within the Bank of Albania’s medium term inflation target. Moreover, monetary indicators generated contained inflation pressures, reflecting also a prudent monetary policy of the Bank of Albania. In March, the Supervisory Council of the Bank of Albania decided to increase the key interest rate by 0.25 basis points, to 5.25%. This decision was made in response to added inflation pressures of foreign origin. It aimed at retaining the anchoring of economic agents expectations on inflation and minimising secondround effects. Even after this increase, domestic monetary conditions remained stimulating and provided the economy with the appropriate support at this stage of its development.