For one, the Committee found that banks did not obtain sufficient financial information to allow for a full assessment of how much and what types of risk had been assumed by large HLIs. In particular, banks did not obtain the information needed to assess leverage sufficiently. They did not have sufficient information to understand HLIs’ concentrations in particular markets and risk categories, or their exposure to broad trading strategies. BIS Review 36/1999  2  Also, banks did not sufficiently understand the ability of HLIs to manage their risks. Because risk profiles can change from one day to the next, or even from moment to moment, it is necessary for an HLI’s counterparties to ensure that the HLI can effectively manage its business operations and risks on an ongoing basis. Exposure Measurement The Committee also concluded that banks should develop better measures of the credit exposure resulting from different types of trading activities. In particular, banks must develop more effective measures of what is called “potential future exposure.” Potential future exposure measures the credit exposure between a counterparty and a bank, and how this exposure could change in the future as market prices fluctuate. The ability of banks to measure potential future exposure is crucial when dealing with HLIs. Unfortunately, methods for calculating potential future exposure had not kept pace with the growth and complexity of HLIs. As we have seen, under volatile market conditions, a bank’s exposure to HLIs can grow substantially. In many instances, banks request HLIs to post collateral covering their exposures.

You have informed the public on our actions and interventions related to monetary policy, as well as on our decisions related to financial stability, market efficiency, banking regulations and other more specific aspects. This leads us to the conclusion that the level of reporting has improved significantly, which, in turn, urges us to be more demanding of ourselves in all the arguments and analyses underpinning our decision-making. I would like to thank you for your constructive role in reporting news items related to developments in the economy, finances, money, the banking system, inflation, financial stability, as well as to the risks towards which our economy is exposed. I would also like to assure you that the Bank of Albania will continue to be an open and very loyal institution vis-à-vis the media. The Bank of Albania will be continuously open to communication with regard to the entire spectrum of economic, financial, contemporary, professional and unbiased news. Dear ladies and gentlemen, It has become a tradition now for us to organise, during the end-of-year meeting with the media, a modest but very meaningful ceremony: the awards ceremony for the best diploma thesis. We value true scientific research in its highly beneficial capacity, from a long-term perspective, to enable the building of contemporary and sustainable research models. From this point of view, the Bank of Albania has endeavoured to boost its research capacities, something we consider to be essential, ultimately helping to perfect our entire decision-making process related to monetary policy and financial stability.