, achieving fiscal sustainability, and rebuilding a sound, domestically oriented financial sector. comprehensive capital controls were a key element in the programme. the recession that followed was the deepest in post - war history, with gdp falling by 12 % from peak to trough and unemployment soaring from around 2 % pre - crisis to a peak of 8 – 9 %. the exchange rate fell by over 50 % in 2008, taking the real rate to around 30 % below its long - term historical average. that helped turn the huge current account deficit around to an underlying surplus but wreaked havoc on domestic demand and balance sheets, as ⅔ of corporate debt and 20 % of household debt was in foreign currency, and an additional ¾ of household debt was indexed to the price level. but the policy measures were successful in turning the situation around : the exchange rate stabilised in 2009, fiscal consolidation progressed from 2010 onwards, growth resumed in the second half of 2010, the sovereign regained foreign capital market access in summer 2011, and the new banks were profitable and well capitalised. on the other hand, private sector debt restructuring has proven more time - consuming than originally hoped, and lifting the capital controls is a challenging task. according to the latest figures, iceland ’ s growth rate is 4. 5 % and the unemployment rate has fallen to the 5½ – 6 % range. what lessons can be drawn from this story? 1. excessive and volatile capital flows played an important role in iceland ’ s crisis, and the capital controls and the underlying balance of payments problem are a legacy of that. 2. to a significant degree, the euro area crisis is also a capital flow – balance of payments problem. 3. the framework for cross - border banking in the eu is deeply flawed. either there will be a regression of financial globalisation at the eu level, or the freedoms must be matched by public frameworks and policies. 4. in the absence of international or eu - wide reforms, small, open economies like iceland might have to take action to protect themselves, such as restricting the international activities of home banks and placing much more stringent prudential limits on foreign currency maturity mismatches and foreign currency lending. 5. an independent flexible currency is a double - edged sword. in iceland ’ s case, it was both part of the problem and part of the solution. 6. we need to think of ways to protect the sovereign from failing banks. bailing out bondholders is probably not always the best policy. 7. finally

. in this way, regulatory systems are advised to be reviewed and elaborated to be better adapted to current developments and to financial system ’ s perspectives. the financial system does not operate in the vacuum. it functions under real conditions and our task is to adapt to best experiences. i think our task is to identify the best practices and to try to adjust them to the real conditions of our economy, because by adjusting them to the whole regulatory framework and banking activity, we come to a motif and motivation : the european community. i am confident that you will use this seminar to find out joint elements in the activity of your institutions, as well as to identify the distinctions. i think it would be valuable to identify also the cases that represent what is regarded as the “ best practice ” in deposit insurance area. in this way, it would contribute to the achievement of the objective to standardize the regional insurance practices and to create a clearer vision on the insurance activity performance in the future. the activity of the albanian deposit insurance agency is new. as such, its capability of operating in extreme cases is not proved yet. nevertheless, efforts are made constantly for fulfilling the necessary legal framework and procedures, covering all possible directions of its activity. simultaneously, there is worked in terms of organizing the structure, increasing the institution ’ s staff number and training. emphasis is laid on the dia ’ s cooperation with the bank of albania, the supervisory authority, so that the dia carries out its functions effectively. at the same time, the relation with the ministry of finance is taken into consideration in organizing the deposit insurance agency ’ s structure, so as to have the solid presence of the state in it. the forms of this cooperation are numerous, but all of them should be first consolidated under normal conditions of the banking system activity. the main elements of this cooperation are : • exchange of information on supervisory practices and observance of regulatory requirements by the insured entities ; • organization of joint trainings in getting acquainted with respective functions ; • acquaintance with and discussion on manuals and procedures requiring the commitment of both institutions in certain cases, and the testing of these procedures. the bank of albania and the deposit insurance agency are working for enhancing this cooperation constantly. 2 / 3 a number of legal and regulatory alterations that are being prepared in parallel by both our institutions, and the exchange of information, as well as more frequent contacts between both institutions serve this purpose. it is aimed at adopting best practices in this area, and at implementing the recommendations given