Cash and nominal government bonds facilitate regular operational needs and can be quickly deployed to fulfil urgent liquidity needs under stressed conditions. Advanced economy inflation-linked bonds are less liquid than nominal bonds but provide inflation protection. Equities provide exposure to long-term growth assets with higher return potential but also with higher risk. MAS’ investment horizon is longer than that of many central banks. This has given MAS the flexibility to invest in more volatile (and longer ‘duration’) asset classes beyond fixed income, including equities. Both the risk management framework and strategic asset allocation are approved by the MAS Board of Directors and reviewed regularly. Efficient investment process MAS strives to achieve an efficient investment process, underpinned by two elements: one, judicious benchmark selection and customisation; and two, tapping on specialised external investment expertise First, benchmark selection. MAS uses asset class benchmarks to represent the investment universe and risk profile of each asset class that can be easily replicated, to evaluate its investment performance. These benchmarks could be market-capitalisation weighted or customised. For some asset classes, we have chosen to apply certain customisations to marketcapitalisation weighted benchmarks, guided by considerations of liquidity, stability, and concentration risk. 5/7  BIS central bankers' speeches  One area we have applied customisation is in the fixed income asset class, where it is relatively more important to guard against concentration risk. This is because the response to credit risk is more asymmetric for fixed income than for equities.

In this framework, it is worthy to note that during the five years of its existence, crucial results have been achieved, most noteworthy the approval of the National Retail Payments Strategy (2018–2023). The insofar findings clearly evidence the low financial inclusion of the Albanian population, not only compared with the European Union, but also with regional countries. All these are reflected in a high use of cash in the Albanian economy. Empirical studies by the Bank of Albania in collaboration with the World Bank Group show that the use of cash in economy, beyond the diminishing effects on the mechanisms of the Bank of Albania used for maintaining price stability and safeguarding financial stability, and supporting economic development, has a real cost from its use as a means of payment, amounting to more than 1% of GDP. Furthermore, the use of cash may be seen as a promoter of informality in economy. Hence, this strategy aims to establish a contemporary and comprehensive retail payments market, supported by safe and efficient infrastructures, as well as by a wide range of payments instruments and services that fulfil the needs of financially capable users across the country. This strategy, compiled with the valuable support of the World Bank Group, is the outcome of a long and analytical study and aims to best address the needs of the domestic market. The realisation of this vision is assessed to be materialised through a set of legal, regulatory and infrastructural developments, which promote technological developments and innovation in the payments market.