Although it has injected a weak stimulus to the economy, the consolidating fiscal policy has facilitated the accommodative monetary policy pass through, by reducing the risk premia in the economy, favouring the reduction of financing costs, and increasing the space for lending to the private sector. According to reports from the Ministry of Finance, for the first time after six years, the public debt was reduced from 72.7% of the GDP in 2015, to 71% in 2016. The Bank of Albania has been and is certain in the position that efforts for reducing public debt should continue. The functioning of the monetary policy pass through mechanism, and factors contributing to or preventing it, are an integral part of the work of the Bank of Albania. Research efforts in 2016 aimed to assess the ability of the tools used for generating economic projections at the Bank, as well as the understanding of the functioning of monetary transmission vis-a-vis the current challenges in the financial system. In this context, I would like to point out that the Bank of Albania has identified two main obstacles in the monetary policy pass through mechanism, whose solution requires broader-scale cooperation. The first obstacle relates to the high level of non-performing loans. To reduce this risk, a national action plan for reducing non-performing loans has been drafted, and is currently underway. The second obstacle relates to the high level of euroisation in the economy, which creates potential risks in the financial system and renders the monetary policy pass through more difficult.

Banking union should now be completed following the finalisation of the 2  BIS central bankers’ speeches  Comprehensive Assessment and the SSM taking on supervisory responsibility. This means in particular completing the SRM, enhancing the borrowing capacity of the Single Resolution Fund and thereby delivering on the commitment to establish a credible backstop. Moreover, looking forward, a greater integration of financial markets – also referred to as a Capital Markets Union (CMU) – would be warranted to further reduce fragmentation of financial markets, improve funding to SMEs, enhance the transmission of the ECB’s monetary policy, and overall benefit economic growth. We look forward to the detailed elements that the Commission will announce in the course of 2015 and I have no doubt that the European Parliament as co-legislator will again play a decisive role in this regard. The collateral framework of the Eurosystem Let me now say a few words on the second topic you have chosen, our collateral framework. Since the very beginning, the Eurosystem collateral framework had been designed to achieve two goals at the same time: First to protect the Eurosystem from incurring losses, as it is explicitly required by the Statute of the ECB/ESCB; second to ensure that Eurosystem credit operations can be carried out smoothly by making sufficient collateral available. The past and recent experience has shown that such a dual set-up of the Eurosystem collateral framework has been indeed very effective. So far, the Eurosystem has never had to recognise a loss stemming from the Eurosystem credit operations.