During 2016, we intensified our work to enhance the effectiveness of electronic payment instruments, and reduce the use of cash in the economy. For that purpose, in accordance with EU directives, the regulatory framework on electronic payment instruments was revised. Moreover, to fulfil the recommendations of the National Payments System Committee, a project was finalised on the standardisation of the payment-order; meanwhile, the implementation of the Interbank Direct Debit project is underway. It is aimed at increasing the use of this instrument by the clients of all banks, contributing thus the reduction of cash in the economy. In our judgement, the coordination of the monetary policy with the micro and macro-prudential measures by the Bank of Albania has contributed to promoting monetary and financial stability. 4. Fostering internal control and monitoring systems and procedures The last two years have seen important changes in terms of fostering internal control systems, in order to bolster risk prevention. The internal audit at the Bank of Albania is an independent activity from the management, ensured through the Inspector General, appointed by the Parliament. It also contributes to a smooth operation and accountability at the Bank of Albania, assessing both the control over processes and the efficiency in the use of resources. The practices in control systems are approximated with international audit standards, and are adopted to address recommendations by international institutions. One of the recurring recommendations from these institutions pertains to the implementation of the operational risk management at bank level.

Third, we have strengthened the regulatory and reporting requirements for banks as regards the due management of credit risk, in accordance with European practices. Fourth, we have intensified the communication with the banks to address the credit portfolio quality, concerning both the treatment of non-performing loan borrowers and loss loan write off. Fifth, the coordinative role of the Bank of Albania has produced results in terms of restructuring borrowers exposed to more than one bank and will continue in this year to prepare an interbank cooperation platform for a solution to common borrowers; the Bank of Albania is drafting it in cooperation with World Bank’s FinSAC project. In our judgement, the steps taken insofar for resolving non-performing loans will contribute to a fruitful environment to boost sustainable and sound lending. This is a major priority, which requires a multidimensional action matrix and a broad cooperation between state authorities and the banking system. In this aspect, the Bank of Albania drafted and promoted the signing of a joint Memorandum of Understanding for the Sound Growth of Credit in Albania1. In the supervisory process, the Bank of Albania has supported the pursuit of pro-active policies 5/8  BIS central bankers' speeches  against potential risks, with regard to both the quality of the risk analysis performed by banks, and the creation of adequate provisions. This new approach, introduced a year ago, has required amending the regulatory framework, as well as internal practices and capacities.