banking industry should make the necessary proposals in a prompt fashion and the public authorities should commit to considering them. lastly, i want to elaborate on two other issues. the first relates to governance and accountability in banking operations and the second to the improvement of capacities for the identification, evaluation and management of risks. these two issues have continuously been part of our regular communication as they rest on the cornerstone of a safe and successful banking activity, public confidence on which remains unwavering. concerning governance, last year i constantly highlighted the need for professionalism, commitment, responsibility, farsightedness and accountability to be reflected not only by you but they should also be embodied in your staff. to make this happen, policies and rules for defining strategies for the development, concrete decision - making, control of particular activities and their reporting to the institution and the public need to be continuously completed and improved. internal control systems are the ones to determine the institution ’ s capacity to operate safely. they are indispensable to avoid any room that may be used for abusive actions that would impair the institution. i therefore request that you take the necessary measures in terms of financial, human and technological capacities in order to ensure the safety of each banking operation. in pursuing its supervisory function, the bank of albania will have this matter under close focus and i assure you that any decision that may have hampered the safety of the activity will be handled with utmost stringency by the law. in a broader context, banking activity, in addition to operational risks, is faced with other financial - related risks. we will therefore increase the regulatory requirements for banks to be engaged in an integrated process of risk evaluation and management proportionate to the level of development and sophistication. in a more practical approach, this implies that banks should have specific functional structures that monitor risks in the main activity areas and endeavour to anticipate their possible evolution and impact on banks ’ activity. these structures must be in place in the largest banks and their products should be an integral part of the decisionmaking process. dear participants, we are leaving behind a challenging year but other numerous challenges will follow for banking activity. they provide us the opportunity to put our vision into practice, in order to ensure a stable banking activity as a precondition for conducting an efficient intermediation activity with remarkable contribution to economic development at home. weathering the challenges requires courage and professionalism. in addition, banking institutions should provide an environment where accountable and professional human capacities are in the

sector in particular in the future. firstly, on general measures, i would support any such one that will contribute to : the establishment of a strong legal framework for property title and property rights in albania, which in return will be instrumental in developing a non - financial asset market and increase price transparency and ultimately, strengthen the process of risk assessment. secondly, efforts should be made to develop the non - bank financial market as well the capital market in general. this will help to better support the economic development of the country and of various economic agents, increase their opportunities to finance their needs in a more diversified and competitive way ( thus improve their skills in managing risks ) and release some pressure from the banking sector. thirdly, the public authorities in the country ( the supervisory authorities and the government ) must have sound contingency plans for possible financial crisis management. recent events in other countries, have shown the importance of having a wellcoordinated plan of actions, which is discussed, agreed and tested in advance. fourthly, when it comes to the regulatory and supervisory framework of the banking sector, i am in favor of introducing the necessary changes to make it less pro - cyclical. in the case of albania – where the minimum required capital levels are already high, i would be more in favor of introducing the model of dynamic provisioning adapted to the business structure and to the level of technical sophistication of the banking sector. in addition and in a more general position, i would support a revision of the regulatory framework toward clearance and simplicity, even though it might be interpreted like i am supporting more a rule - based approach in supervision. i think that a regulatory framework is really effective and successful when it combines both the simplicity and transparency of a rule - based approach with the flexibility and forward looking characteristics of a principle - based approach. in any case, i believe it is necessary to make banks responsible for convincing the supervisor on the risk and return characteristics of various new products, before they exceed a certain threshold in size and exposure. this is achievable if the supervisory framework is always built with the main focus on assessing and managing the risk in different directions of the banking activity. fifthly, when it comes to choose between lending in domestic currency or foreign currency, one should have various considerations in mind related with the nature of currency flows in the country, the concerns of the transmission mechanism of the monetary policy, the nature of the exchange rate regime, the currency composition of the asset - liabilities