Even when a small institution fails it causes disruptions and a loss of confidence in banks in general. We have recently had bad experiences in Sweden, so if you intend to introduce risk-based supervision I advise you to do it with caution. Going one step further – how to set the boundaries between banks and other financial institutions? In my opinion, it is very important to safeguard the general public’s confidence around the concept of a bank and it must be protected by a clear definition of a bank and what it can do. In Sweden, the definition is based on the combination of a bank receiving deposits and being active in the payments system. However, a more common definition of a bank focuses on the combination of two activities, namely the receipt of deposits from the general public and the granting of credits to borrowers using these funds. In accordance with international practice, this combined activity should be a privilege of banks. Other institutions may issue deposit-like instruments in high amounts and not directed to the small savers. To highlight their different characters, such instruments should not be protected by any depositor guarantee scheme. But apart from the deposits, most bank activities might also be open to other financial institutions and vice versa. Insurance companies could sell savings products and banks could sell securities. Should you allow “financial conglomerates” mixing banks, securities companies and insurance companies in the same groups?

Selling impaired assets at their real market value is the starting point of the process for making financial correction and enriching the private sector’s balance sheets and the financial system a whole. Cleaning up balance sheets would promote economic activity through consumer investments, by ensuring a constantly improved credit quality. Currently, the mutual influence of economic activity and credit quality is the main concern to monetary policy. Efficiency of successive interventions by lowering the key interest rate is overshadowed by negative expectations. Consequently, the effects of business and household consumption and investments on domestic demand are not at the desirable level. In spite of these problems, economic growth remains in positive territory, but below the potential. According to our estimates, it will remain positive even in the future. Economic and financial operators’ inflation expectations remain anchored around the Bank of Albania’s target. Good liquidity condition and capitalization of the banking sector, and stability of macroeconomic indicators have led to harmonised economic policies for maintaining the status quo. If this situation remains as such in a predictable time horizon, the monetary policy may remain accommodative over the same period. The recovery of the domestic demand and economic growth is further related to expectations, which are also affected and contaminated by our trade partners’ condition. The fiscal policy has aimed at fiscal consolidation and has continued making efforts to prudentially provide necessary fiscal stimuli. Currently, if the privatization process is successfully completed, then the fiscal opportunities for promoting economic growth and for revering any negative expectations are significant.