gent sejko : bank of albania highlights for 2015 and priorities for 2016 speech by mr gent sejko, governor of the bank of albania, at the press conference on bank of albania highlights for 2015 and priorities for 2016, tirana, 3 february 2016. * * * year 2015 was a challenging one in the light of maintaining and consolidating the economic and financial stability and of improving the institutional framework of the bank of albania. the bank of albania has provided substantial contribution to maintaining and consolidating macroeconomic balances and financial stability in albania. the accommodative monetary policy, implemented throughout 2015, was a pivotal underlying factor for ensuring an economic and financial environment with low interest rates, amid ample liquidity. the prudential supervision of banks, the regulatory improvements, along with the intensive exchange of information with european and international counterparts contributed to strengthening and safeguarding banking system's financial stability. the beginning of 2015 coincided with a set of institutional decisions adopted by the parliament of albania and the supervisory council of the bank of albania, which provided the ground for the return of public confidence to the institution. in concrete terms : • the management structure of the bank of albania was completed ; • the audit committee, composed of three supervisory council members, started its activity ; • the inspector general resumed reporting to the supervisory council ; • the medium - term development strategy and medium - term budget for 2016 – 18 were approved ; • the new organisational structure was approved ; • the head offices renovation and construction works were completed ; • and the museum of the bank of albania was launched. these highlights contributed to strengthening good governance, accountability and subsequently enhancing public confidence in the bank of albania. the monetary policy intensified the simulating stance during 2015. the bank of albania lowered the key rate twice, continued to inject the necessary liquidity in the financial markets and clearly communicated the future monetary policy stance. our monetary policy was successful in easing the financing conditions in the economy and helped in the return of the albanian economy to a positive development track. in particular, interest rates on new lek loans and servicing costs of existing credits fell. lek credit increased, offsetting the continuous fall of the credit portfolio in foreign currency. also, the share of lek credit in the total credit portfolio has been increasing, from around 28 % in 2008 to 43 % in 2015. these actions have played a vital role in accelerating the economic growth during the last two years. during 2015, the banking

imf which suits its actual needs very well. given albania's difficult legacy, together with the setback of the 1997 events, the country needs to accelerate its reform agenda, not least to for it to be grouped together with countries like macedonia for eu accession purposes. this requires significant investments, improvements in public institutions, and technical assistance in all sorts of fields. the prgf element allows albania not only to access many of these resources from the imf and wb organizations but also have the support of the albanian government in absorbing more effectively available eu funds. we are also working for the institutionalisation of the cooperation between the central banks of the region. judging from the meetings we have recently organised with some of the regional banking authorities, the initiative on regional cooperation has been welcomed. nevertheless, i believe that it is the right time to carry out concrete measures in this direction through the establishment of a club of regional banks, which would enable the exchange of experiences and the consolidation of cooperation, mainly in the field of further financial / banking sector development in southeastern europe. bank of albania will continue to actively support and promote the establishment of this club in the future. i want also mention here the “ convergence ” program which is a novel financial development program sponsored by the world bank to promote public - private policy dialogue in south - east europe. it could serve as an effective instrument to catalyse our efforts in bridging the gap with banking association and the other counterparts in the region. how do governors keep the balance between growth and stability? theoretically, the answer would be to apply some kind of a ‘ taylor rule ’ by putting even weights on both output gap and inflation. however, for a small, open and developing economy the empirical experience may not be that simple. one issue would be how able are countries like ours to pursue independent monetary policies. an argument that i do advocate is that the albanian economy is a relatively flexible economy, as it manages to bring inflation to normal levels in quite a short period of time. rigidities, observed in some other economies, seem not to apply in the case of albania. here, i have in mind the long hiring and lay off procedures or the variety of rules related to the goods and services markets. most importantly, the adoption of a flexible exchange rate regime has been and still is one of the main contributors to economic flexibility, which has a direct impact over the high mobility rate of the albanian economy. due to this flexibility albania has shown impressive results in terms of price