have reflected the banks ’ targets on financial indicators, the monetary policy at home and in the countries of the major currencies, as well as the country risk margin. we deem that over this period, these interest rates have been appropriate for a sustainable development of the banking financial intermediation. during the last 2 – 3 years, the country ’ s economy was affected by the global economic and financial crisis. the public authorities at home were committed to supporting the domestic economic development by pursuing stimulus fiscal and monetary policies. in the banking sector, the global financial crisis appeared mainly with the contracted paces of lending to the economy. throughout this period, the bank of albania has aimed at preventing the deepening of the impact of this crisis by conducting an ease monetary policy and supplying the interbank market with necessary liquidity. during 2009 and 2010, the bank of albania lowered the key interest rate by 1. 25 percentage points, to 5 %. also, during the major part of 2009, the banks benefited unlimited liquidity, at an interest rate equal to the key policy rate. in the meantime, before the impact of the crisis, through special regulatory acts initiated bis central bankers ’ speeches since 2006, the bank of albania has aimed at limiting some risks arising from banking activity, such as rapid and foreign - currency lending, by setting higher capital requirements for more exposed banks. throughout this period, we have communicated regularly with the public at large, businesses and banking industry, to explain our actions and discuss the challenges posed to economic actors. we believe that as a result of these actions taken by public authorities and the cooperation with the financial industry, the banking sector has successfully withstood the impact of the global financial crises, remaining sustainable and maintaining positive indicators of financial intermediation. thus, during 2010, the banking sector credit growth, albeit lower than in the pre - crisis period, was considerable, around 9 %, while in some central and south - eastern european countries, it was negative. the deceleration of credit growth, which was initially driven by supply - side factors, is mostly a phenomenon attributed to the decline in the demand for loans. as a consequence of weaker expectations for activity development, businesses decreased their production capacity utilization, lowering investment objectives and the demand for loan. in spite of weathering the direct impact of the crisis, important challenges lay ahead of the banking sector and the bank of albania. first, the performance of credit quality should be monitored prudentially, aiming to timely identify

and the uncertainty for the nature of its effects, the institutions ’ map, the types of instruments and its extent, do theoretically increase the risk of its impact on the financial system at home. basically, this crisis has not provided its impact on the banking activity in albania. the albanian system ’ s immunity to this crisis arises from certain factors, namely : • the relatively low exposure of the albanian financial system to international financial institutions ; • the low integration level in general ; and • the well - capitalized activity of european banking groups and their branches operating in albania. in general, we consider that no risks that may be materialized or which may harm abruptly and severely the activity of the financial system are identified. however, i would like to dwell on the risk analysis of the banking sector. scenario - based risk analyses confirm that the banking sector has the capacity to cope with the various risks that may arise as a result of the unwelcome shifts in the exchange rates and interest rates. prudent monitoring of assets ’ quality is required and time is ripe to pay greater attention to the performance of liquidity indicators. with respect to the latter, the following aspects are crucial to keep under consideration : first, the absence of a developed money and securities trading market curtails the financial institutions ’ capacities to meet the unexpected liquidity needs through the sale of assets considered as “ liquid ”. in addition, as a result of the financial crisis in the international markets, the trading of some securities, which were previously considered as favourite to the investors, has become challenging second, the differences in the size of the banking sector ’ s institutions, the collateral ’ s quantity and quality, and the restrictions for the direct exposure among institutions hamper the circulation of liquid funds in the interbank market in the duly time and extent. third, given the enhanced competition, there is a risk that significant disproportions arise between assets and liabilities in the balance sheet, with regard to type of currency and maturity term ; fourth, some institutions have also turned to borrowing from parent banks in order to maintain the lending promptness and size ; fifth, owing to objective factors that have conditioned the lack of efficiency, the banking sector at home has been characterized by very high liquidity levels. given the enhanced competition and improved efficiency, it is objectively expected that liquidity indicators being to shift downward. these factors hamper the setting of the optimum liquidity level, in which the enhanced efficiency in fund use does not shackle