framework allows the banking system to manage the liquidity effectively, being a counterparty of the last resort to meet the system ’ s aggregate needs for liquidity or invest it. via the required reserve, the bank of albania has provided you with enough room to cover your unexpected liquidity needs, at a remuneration rate close to the market interest rates that avoid the distortions the required reserve may yield to your banking business. our regulations, which restrain the banking business operational, liquidity or market risks, are in full compliance with the international standards, providing at the same time enough room for the development of the interbank market. we have also taken major steps in terms of the institutional development of this market, through the establishment and maintenance of tribor and tribid reference rates, through constant communication with the dealers ’ association and promotion of new interbank market instruments. i would like to inform you today of the last bank of albania ’ s step in this regard, and also ask for your greater attention in terms of taking prompt actions that will boost the activity and role of the interbank market. change of the bank of albania ’ s operational target framework the bank of albania is in the final phase of reviewing its operational targets. the latter will soon change their form, shifting from the quantitative targeting of the bank of albania ’ s balance sheet to the targeting of interbank market interest rates. the operational targets of monetary policy play a key role in the formulation and conduct of monetary policy. in a theoretical background, these targets serve as a link between the monetary authority ’ s interventions in the interbank market and the intermediate target of monetary policy. thus, the operational targets serve as the starting point of the monetary policy transmission mechanism. in practice, these targets serve to steer and discipline the monetary authority ’ s interventions in the money market quantitatively. the rapid transformation of economic structure and the development of interbank markets and economic agents were coupled with fundamental changes in the monetary policy transmission mechanism. the latter has now become more complex, involving more players whose sophistication is ever - increasing, and incorporating more instruments and financial contracts that are timely structured and indexed to different indicators. the albanian economy is now economically and financially integrated into the global economy, having the characteristics of a market economy but at the same time featuring the typical challenges of economic management that such an economy entails. these changes have called for the constant monitoring by the monetary authority in order to make the necessary changes in the monetary policy regime and the operational

ardian fullani : development of the interbank market in albania and the bank of albania speech by mr ardian fullani, governor of the bank of albania, at the forum “ interbank market development and improvement of operational policy at the bank of albania ”, tirana, 21 june 2010. * * * dear bank managers, dear colleagues, we are gathered here today to discuss an essential issue concerning the performance of our financial market and the albanian economy on the whole : interbank market development and strengthening. i do believe that the role and importance of the interbank market is clear to all attendees. it represents the first link of liquidity trading in economy and the most transparent price setting mechanism. by providing the appropriate instruments and partners for liquidity trading, the interbank market allows the refinancing of short and medium - term positions and facilitates the mitigation of your business ’ liquidity risk. the banking system and the interbank market represent the exclusive setting monetary policy operates in. a developed, active and efficient interbank market enhances the efficiency of central bank ’ s monetary policy, transmitting its impulses into the economy best. thus, the development of the interbank market smoothes the progress of financial intermediation and boosts lending to economy, hence improving the country ’ s economic and social welfare. the deepening and broadening of the financial market is one of the key structural reforms in economy. it should be ceaseless and it requires the commitment of domestic and external factors. it naturally adapts to the different economic development stages the country and the state go through. i do believe there cannot be a developed and well - integrated economy without open, integrated, efficient, transparent and well - regulated markets. therefore, it comes out clearly that the development of the interbank market is in all stakeholders ’ interests : the banking system itself, the bank of albania and the economy on the whole. being fully aware of this, the bank of albania has built a clear strategy in terms of : 1. deepening and broadening the money market in albania further ; 2. creating relevant market instruments ; 3. establishing a close and rational cooperation with the banking system and the financial market in general ; 4. ensuring a clear and constant communication with the market operators and the public at large ; 5. providing modern technological solution. as a result of these initiatives, our monetary policy is now entirely based on indirect instruments of monetary management, which operate in line with the open market logic. our operational