, coordinated and extraordinary measures, both in the area of monetary and fiscal policies. central banks abandoned almost any restriction and even adopted unconventional measures in providing ample and low - cost liquidity to the financial markets. governments showed a strong commitment to reduce systemic risk by saving important financial institutions, by providing guarantees for inter - bank lending, by raising the level of deposit guarantees for the public etc. such measures, most of the times designed as temporary, appear to have been successful in restoring the market confidence and steering the world economy back in the gradual recovery path. focusing on the financial markets and institutions in the aftermath of the crisis, a number of issues, previously known but many times neglected, have re - appeared forcefully to request a serious and thorough response by the authorities. many of these issues relate to the financial activity itself, others are connected more with the surrounding economic environment. it can be said now that the supervisory authorities of the financial markets and institutions are partly responsible for what happened. despite the rhetoric, they failed to properly and timely identify and control the risk in the financial industry. here one can mention the soft - hand on bank wholesale borrowing that financed the foreign currency credit in a certain jurisdiction, the neglect for the special purpose entities that were created to by - pass balance sheet prudential requirements etc. there are many reasons for this weakness and a number of them, in my opinion, go beyond the legal and resource capabilities of the supervisory authorities to act. on their own, the supervisory authorities were wrong in basing their work on the misconception that strong individual financial institutions are sufficient for the entire financial system stability. by doing so, they missed the negative effects and excesses that arise from the herd behavior of the financial institutions, many times a consequence of the pro - cyclicality that is inherent in the financial activity and the regulatory framework itself. the attention of the supervision was focused on the banking sector, but insufficient attention was given to its interaction with the non - banking financial sector, that by being much less regulated, in the meantime was increasing in size and importance. also, as part of their general and commending goal to focus their supervisory approach on the most important risk sources of the financial industry, but also as a sign of their objective difficulty to keep the pace with the financial markets developments and innovations, the supervisory authorities relied more and more on the market discipline and on the sophisticated and unclear risk models of the financial industry, that also proved to be deficient. some times, the

ardian fullani : bank - business relationship in albania greeting speech by mr ardian fullani, governor of the bank of albania, at the meeting “ business bank communication day ”, tirana, 20 october 2005. * * * ladies and gentlemen, recently, the promising paces in the increase of crediting to the economy from the banking sector make us realize that the numerous meetings organized with the scope of approaching banks to businesses are finally producing their results. nonetheless, it is yet, too soon to describe it as a victory. without diminishing the significance of these meetings, i think that the expansion of business crediting is not an effortless issue to be solved, especially when considered that our economy is still in transition. frequently, the solution to the arousing issues goes beyond the good will of both, the business and banking community. thus, avoiding the rhetoric of the previous meetings which habitually sets one ’ s party claims against the other, i would like to emphasize the need of a better coordination of efforts by the two communities to the solution of various issues. a few days ago, on the privatisation anniversary of one of the participant banks present in this meeting, i stressed the necessity of intensifying the institutional relationship between the banking system and the different business associations. therefore, this meeting is an outstanding example of putting this initiative into practice and i trust it will serve as a good start of the regular contacts between the banking association and the business one. the bank - business relationship institutionalisation might assist in resolving a number of issues, which may be challenging to be addressed individually by banks or businesses, be they large ones. the best example is the effort of reducing the informal economy. all present parties in this meeting have expressed their pros to the fight against evasion and informality. in reality, however, the dishonest competition forces many of them to choose the informal means, since, contrary, they will find themselves out of the market. the breaking of this vicious circle could be made possible by a better coordination of our efforts, in order to avoid the so - called free - rider phenomenon, where the dishonest business is given too much room to take advantage of the situation. hence, i welcome today ’ s meeting, hoping that it shall not simply remain within the communication context, but rise in a higher level of coordination. 1 / 1