For the SSM, this vigilance requirement has led to the establishment of three supervisory priorities for 2019: first priority is, given the continuing high level of outstanding non-performing loans, to monitor the euro area banking industry’s credit risk by providing further strong incentives to lower exposures – efforts which have already resulted in a substantial reduction; second priority is to ensure that institutions manage their risks appropriately, including behavioural aspects such as customer protection and the prevention of money laundering, the significance of which has become abundantly clear in recent years; third priority is to manage multidimensional risks, the most pressing of which being Brexit. The SSM’s priority in this respect is clearly to ensure that euro area banks operating in the United Kingdom and vice versa have drawn up contingency plans to cope with the loss of European passporting rights after Brexit. c. What role can macroprudential policy play? Macroprudential policy can play a complementary role alongside microprudential supervision by following a more preventive approach that addresses the financial system as a whole. Macroprudential policy can play a preventive role with regard to debt trends and to the financial cycle: the current phase of the cycle is conducive to greater risk-taking, and the French macroprudential authority, the Haut Conseil de stabilité financière, has taken steps to limit this and/or prevent negative consequences in the event of a financial shock. The HCSF therefore keeps a close eye on markets or activities where exuberance is more likely to emerge.

Although drafting recovery plans is the task of individual banks, the Bank of Albania, in its capacity as the Supervisory Authority, plays an essential role in assessing the quality and reliability of these plans. During 2018, banks have prepared recovery plans based on a new bylaw adopted by the Bank of Albania that sets out their detailed content. The opening panel of this Conference will present concretely our assessment of these plans. In brief, we may say that our challenges remain the same as those faced by other supervisory authorities, whether in European or regional countries. In sound financial situations, such recovery planning allows the Bank of Albania to deeply understand the structure and activity of the bank, thus supporting our supervisory process to identify areas for improvement, as well as bank’s self-diagnosis in these areas. In stressed financial situations, the recovery plan is the main document the bank has to correct its difficulties and, as such, it must be efficient, applicable and comprehensive. The second step of the new crisis management framework is related with the early intervention in the bank. This step is activated if, after the implementation of the recovery plans, the bank’s actions fail to improve the situation. The Bank of Albania, in the capacity of the Supervisory Authority, undertakes several concrete early intervention measures in the bank, before the bank shows signs of insolvency. Currently, we are in the process of drafting bylaws for the early intervention implementation in accordance with the new legal requirements.