at present, the maintaining of basic balances, i. e., the macroeconomic balance and the financial one, is our major objective. these two pillars represent our legal mandate. therefore, we must do the utmost to consolidate the inherited balances, by making cautious analyses and taking appropriate measures to best absorb all the risks posed to the country ’ s macro - financial stability. currently, the fulfilment of our legal mission has become a difficult and challenging task, full of surprises. our countries represent small economies, whose share and influence can not play an active or imposing role in the international arena. moreover, i am increasingly convinced that our economies are net importers of both material goods and international crisis. bis central bankers ’ speeches personally, i think that the moments we are currently experiencing constitute an historic opportunity for all of us, to leave a good name as competent managers in times of the great crisis. as long as things go well, we fail to understand the need for ongoing adaptation, for constant correction. this is the reason that mostly leads to creation of “ financial bubbles ” in the economy. apparently, decision - makers lack the ability or the willingness to stop blowing bubbles, and hence they burst. from this viewpoint, i assess that the bank of albania ’ s experience carries over elements of preliminary correction, i. e., preventive elements. let me be more specific. since early 2005, we have addressed the interplay between macroeconomic stability and financial stability prudentially. while there was a historic stability in keeping inflation in check, there existed many unclear things in the banking system stability. i would like to remind you, briefly, of the fact that we are talking about a period when the banking system was transformed into a 100 % private capital and when credit expansion dominated the banking business. since 2005, the outstanding credit to the economy has expanded by 7 – 8 percentage points of gdp. moreover, 75 % of credit was denominated in foreign currency and the hedging against exchange rate risk was frequently overlooked. it was the time when competition for market share increased tremendously among banks, even at the expense of credit quality. periodic examinations conducted by banking supervision identified several vulnerabilities that could threaten the financial stability of the system. i would mention : lack of an electronic credit register ; risk management weaknesses, structural weaknesses in internal audit ; lack of transparency in dealing with customers about the supplied products. one of the most important issues worth mentioning is bank management in

ardian fullani : banking system and economic development speech by mr ardian fullani, governor of the bank of albania, at the joint press conference with mr gani gerguri, governor of the central bank of the republic of kosovo, tirana, 12 june 2012. * * * honourable governor gerguri, honourable participants, i am honoured to take part in the proceedings of this joint activity organised by the central bank of the republic of kosovo and the bank of albania. it is taking place during the jubilee year that coincides with the 100th anniversary of albania ’ s declaration of independence. after a long cavalcade of torments and existential discourses, finally both our countries have entered an irreversible process of transformation and convergence to democracy and market economy standards. the respective financial systems have been part of this process, in which thanks to the dedicated and hard work done by both our institutions, the achievements are numerous. the banking industry of both countries has grown rapidly in recent years, enjoying a stable financial health. it has made a significant contribution to the financing of our economies, leading to a stable economic growth over the years. it is my pleasure to see that the central bank of the republic of kosovo is growing day by day, assuming more and more the characteristics of a modern central bank, like its counterparts in the region. let me take this opportunity to express my appreciation for the commendable work done by the central bank of the republic of kosovo ’ s staff, led by my old friend, mr. gani gerguri. i am fully convinced that we have, and will have even in the future, a responsible and committed institution that aims to successfully fulfil its challenging mission and confront with dignity all the challenges ahead. distinguished guests, for a long time, our economies are finding themselves under the global crisis pressure. recently, almost all our trading partners, such as the countries in our region and the euroarea economies are displaying acute symptoms. this situation has induced elevated uncertainties regarding probable macroeconomic implications and contamination of the financial stability of our countries, mainly through the existence of several european banking groups. despite this international turmoil, our economies have succeeded in maintaining a stable performance. consumption and private sector investments have continued to play a primary role in expanding the kosovo ’ s economic activity, while in albania, the external demand has played a primary role. the other indicators have remained in check. however, their trends must be monitored scrupulously and constantly.