There are also common efforts to fully open our economies and to attract foreign capital. As we are in the process of fully opening our markets, we are benefiting from increased competition, improved productivity and efficiency, and increasing quality of services for our citizens. But, we are also facing several uncertainties and risks. Markets remain segmented and their infrastructure faces difficulties in supporting new and imposed developments. Market infrastructure deficiencies exacerbate their shallowness and make it difficult for various market participants to act in order to meet their business objectives and manage their risks. The technological improvements have to fully show their effect in meaningfully reducing costs of financial services. Regulatory gaps in different areas of local financial markets create the conditions for regulatory arbitrage and may adversely affect the supervisory work. BIS Review 103/2006  1  Therefore, erroneous and costly decisions are unavoidable. The financial situation of single market participants, due to market segmentation, is highly affected by their capacity to find financial support in the international financial markets. In reality, this leads to an increasing gap among so called “big” and “small” or among foreign and locally owned financial institutions. Real economy development is an additional source of risk for financial markets. Such interaction should be carefully watched to better understand financial market trend in the future and identify financial imbalances in a country and regional level. Indeed, we are all experiencing a construction “boom”, where residential house prices have increased considerably.

We have nowadays in our countries the same financial institutions and the same behaviour of such financial institutions in response to a centralized business development policy, growing cross-border interaction among businesses and households, similar trends in social life. Monetary and supervisory authorities in different countries in the region, to a large extent have responded to such developments with establishing formal cooperation with home country supervisory authorities, particularly in the area of banking system supervision, by signing bilateral Memoranda of Understanding (MoU). The fact that our countries are at the borders of the European Union (EU) has caused an increased presence of EU financial institutions, including banks. Hence, the MoU’s have been signed with these EU countries supervisory authorities. The quality of cooperation varies in different countries but one can say with reasonable confidence that the willingness of the host countries to cooperate has not always met the same interest from our counterparts. To an extent this is expected, because the assets of their banks in our single countries sometimes represent only a fraction of their total assets. Nonetheless, they should take notice of our concern that this cooperation is very important for us, particularly in cases where these foreign banks dominate our local markets. The liberalisation of the financial markets in Albania has been a desirable move. We consider the inflow of foreign capital an important factor to upgrade the level of our banking system, improve its efficiency and the quality of its products, by improving competition conditions in the marketplace.