ardian fullani : latest economic and financial developments in albania speech by mr ardian fullani, governor of the bank of albania, at the press conference on the monetary policy decision - making of the supervisory council of the bank of albania, tirana, 27 april 2011. * * * today, on 27 april 2011, the supervisory council of the bank of albania reviewed and approved the quarterly monetary policy report. based on a thorough analysis of albania ’ s latest economic and financial developments and following discussions on their performance outlook, the supervisory council of the bank of albania decided to leave the key interest rate unchanged at 5. 25 %. the supervisory council holds that the actual monetary conditions are appropriate for meeting the inflation target and for continuing to stimulate the economic activity. let me now proceed with an overview of economic developments and main issues discussed at today ’ s meeting of the supervisory council. the albanian economy is deemed to have had a positive performance during 2011 q1. economic activity increased, main macroeconomic balances improved, and risk premiums and interest rates in financial markets dropped. economic growth during 2011 relies on foreign demand for albanian goods as well as on domestic demand. consumption and investments in the country remain slow, beyond the seasonal effect that characterises the first quarter. rapid expansion of exports and moderate growth of imports have led to an improvement in trade deficit, contributing to the balancing of demand and supply for foreign currency and retaining the national currency value. demand - generated inflationary pressures remain contained, due to the existence of free capacities in the economy and controlled consumption, while import prices increase was a principal contributor to the price rise in the country. in march 2011, inflation pointed to 4. 3 %. during the first quarter of 2011, inflation averaged 4. 0 %, i. e., one percentage point above the mid - term inflation target. the country ’ s economy continued to grow during the fourth quarter of 2010, and indirect available data suggest that even the first quarter of 2011 was positive. on average, this growth is estimated to have been lower than the potential growth of the economy, suggesting that domestic demand inflationary pressures have been weak. the rapid upsurge in prices over the last two months is mainly due to the effect of food and oil prices increase in international markets, thus leading to light increase of inflationary pressures and initial appearance of second round effects, in february. in response to this phenomenon, the bank of albania increased the key interest rate by 0. 25 percentage points at the end

the way to approving a package of new regulations, which aim at harmonizing the regulatory and supervisory framework with the best international practices. in accordance with the new banking law, new criteria have been established for measuring, supervising and reporting of bank ’ s large exposures to a person / customer or a group of related persons / customers or having a special relationship with the bank, aiming at managing the risk stemming from the concentrated exposure to them. the strengthening of internal control in banks and branches of foreign banks has been another focus of the bank of albania during the present year. the new regulation considers internal control as part of bank ’ s accountable governance. it provides the platform for establishing an efficient internal control system as key factor in the banks and branches of foreign banks ’ governance and management. special attention has been also paid to the transparency related to banking and financial products and services. the regulation harmonizes the requirements on the way and mode on providing information to customers on banking products and services, on the publication of effective interest rates on deposits and loans, on the method of calculating the effective interest rate on loans, on the constituent elements to be specified in loan and deposit contract, on the marketing of products and services, on keeping the customer ’ s data confidentiality, on dealing with the customer ’ s complaints and on the establishment of specific structures to deal with these complaints. part of this new package has also been the standardization of the required information that banks and branches of foreign banks have to make public, related to the bank ’ s main activity, its organization and management, its financial performance, its financial situation, the risk management and the accounting policies. in light of the international situation and in order to better diversify the risk stemming from the concentration in banks ’ investments in the international financial markets, the supervisory council of the bank of albania amended the regulation on the management of risk from banks ’ large exposures, aiming at reducing large exposures ’ threshold. enhancing the efficiency of the financial market and of the money market in particular, has also been at the central bank ’ s focus. during the year 2008 was approved the regulation on the master repurchase agreement, hence providing a new instrument which reduces risk in borrowing transactions between banks. after this short outline of our performance, of the bank of albania and of the banking system, it comes natural to claim that we have acted rightly by taking a number of preventive measures that have helped us absorb the negative effects of the latest events. dear bankers, year