unit management processes. in other words, the business - line staff should be in the process of developing the firm - wide operational - risk measurement framework. while firms generally are developing corporate - level operational - risk management functions and firm - wide policies and procedures to bring greater consistency to how operational risk is measured throughout the institution, business - line staff can add significant value to this effort through their understanding of inherent risks and controls in their areas. and finally, the more business - line staff is involved in the development of the measurement framework and the more transparent the framework is, the more credible will be the process of allocating the total capital number back to the business lines - an effort in which many of the banks represented here today are now engaged. to be meaningful, the quantification of operational risk must be forward - looking. this means that a mechanical focus on historic loss data series will not work. we must recognize the roles of qualitative factors and a well - reasoned assessment of what we will call stress events or scenario analysis. in this regard, the burden is on management to exercise judgment. clearly, this judgment must include consideration not only of a soundness standard but also of contingencies and actions taken to reduce the risks posed by those contingencies. a self - assessment of the internal control structure and overall risk - management process is crucial. clearly, this is not a simple process if the results are to be relevant to the specific risk profile of the firm. but based on the progress we have seen to date in this area, i think you are up to the challenge and i encourage you to keep moving forward. before i wrap up, i would like to say a few words directly to the potential " opt - in " institutions. an institution that does not meet the mandatory criteria in the framework will be under no obligation to adopt basel ii. some potential opt - in institutions have complex and varied operations and are developing enhanced enterprise - wide risk - management processes and systems to strengthen their internal control environments. these institutions understand that complex operations receive a more structured and well - defined risk - management framework to monitor the effectiveness of internal control processes and risk exposures. for these organizations, the incremental cost to opt into basel ii advanced approaches will be a relatively moderate incremental cost. for other financial institutions, with a simpler organizational structure and less - complex processes and services, a less - sophisticated enterprise - wide risk - management and - measurement is entirely appropriate. for these organizations,

end of the year, which is significantly higher than the annual rates of the pervious years. the credit balance rose by l11. 9bn or 30. 9 %. the new credit increased by 50 % meanwhile 76 % is in foreign currency. the loans / gdp ratio is still low, at about 7 %. the banking system experienced important developments during 2003 and in the beginning of 2004. the entry of two new banks of albanian capital was soon followed by the successful privatisation of the savings bank from the raiffeisen zentralbank ( rzb ) austria. now, all in all there are 16 banks in the albanian banking system. the boa has progressed in reforming the banking system towards international standards, with the aim of the developing and refining the country ’ s banking infrastructure. aips, inaugurated in early march 2004, can be considered as the backbone of the whole banking system infrastructure. the boa wishes to bring its central bank closer to that of the european central bank. therefore, changes and amendments of the bank ’ s regulations are aimed towards achieving this goal.