and on lending levels. - improvement of the regulatory framework and approximation to basel ii regulatory standards improvements to the supervision and regulatory framework are set out in detail in the annual report. however, in this presentation i would like to highlight two important amendments : i. approval of the regulation “ on the capital adequacy ratio ”, which marks the transition from basel i to the new capital accord, known as basel ii ; bis central bankers ’ speeches ii. drafting of the new supervision policy document, which ensures a more efficient monitoring and management of risks facing the banking system. - fulfilment of fsap recommendations financial sector assessment progam ( fsap ) recommendations served as guidelines for improving the regulatory and supervisory framework of the banking system. their implementation focused on the improvement of monitoring the risks facing the banking system and their treatment. some of the recommendations have been incorporated in institutional obligations in the framework of the implementation of the development policy loans ( dpl ) of the world bank. in the first quarter of 2014, the bank of albania fulfilled all the obligations for which it was responsible. - cooperation with other institutions considering the safeguarding of financial stability as a shared responsibility among several supervisory institutions, the bank of albania has closely cooperated with the ministry of finance, financial supervisory authority ( fsa ) and deposit insurance agency to prevent and manage extraordinary situations in the financial system. this cooperation is institutionalised in the framework of the financial stability advisory group. cooperation with the fsa consisted also in joint inspections in banks or associations managing common funds. we have been and remain committed to adopt best international practices and standards, in close cooperation with both local and strategic international partners such as the imf, ecb, eu central banks, wb, fsvc and other renowned organisations. 3. economic development perspective and problems the bank of albania deems that the cycle of economic growth marked a turning point during 2014. in the next years, the albanian economy is expected to pursue an upward trajectory, which may enable the return of the economy to equilibrium and of inflation to target in the medium term. some fundamental factors that will drive this growth, such as eased lending conditions and monetary and financial stability in the country, are present. economic stability and downward financing costs should be supported through maintaining the actual framework of macroeconomic policies. other factors, such as economic activity in the euro area and businesses and financial system ’ s risk appetite are expected to improve. the last group of factors underlying growth, such as business climate

across all its dimensions and structural reforms that broaden development horizons and approximate labour productivity to that of advanced economies, should be further improved through our common endeavours. i would like to emphasise that this landscape describes the expected direction of the country ’ s development in the next two - three year period. in the meantime, under the current situation, the bank of albania is following developments attentively and is assessing the effects arising from the components of this scenario : lending highlights in albania. at present, lending suffers from both the weak and low - quality demand and the conservative lending policy applied by banks. in our judgment, lending will grow at modest rates in 2015. concerning the above, i would like to share the two considerations with you as follows. first, a part of the banking system ’ s conservative approach arises from developments in the european financial market and, eliminating it, will take its time. however, another part of this conservative approach arises from the real or perceived risk of lending, at home. the bank of albania alone may not offer solutions to all the issues that hinder lending. for that reason, we deem that the systematic reduction of credit risk should be treated as an issue of national bis central bankers ’ speeches interest, which should become the scope of coordinated work between public authorities in albania. second, the european experience, along with our experience, has shown that the country ’ s economic growth is not conditioned by the performance of lending in short - term horizons. however, in longer - term horizons, the sustainability of economic growth will undoubtedly depend on the performance of lending. for this reason, we should primarily focus on maintaining and strengthening the soundness of our banking system, for it to be able to respond to future needs of the economy for financing. the bank of albania is undertaking a comprehensive review of lending - related problems. issues that, in our opinion, are yet to be solved and require cooperation from all policymakers include the treatment of non - performing loans and conceptualisation of stimulating factors in banks for healthy lending. the bank of albania will organise two work platforms for each of them, trying to draw in the cooperation of all stakeholders and interested parties. structural developments in parent bank groups. as i mentioned earlier, these arise from both new regulatory requirements of the single supervisory mechanism at european level, an economic / financial developments in the countries where parent bank groups operate. requirements for more qualitative and higher capital levels, which underlie the new european directives on banking activity,