bank and useful for the economy, as it : – provides a more realistic picture of the banks ’ loan portfolio, releases the capital and improves their financial balance ; – improves bank processes, thanks to a more efficient use of human, financial and technical resources, and redirects the focus of the bank toward new loans ; – improves the overall functioning of the financial market, as it contributes to the market “ exit ” of non - competitive businesses. bis central bankers ’ speeches – contributes positively to the market participants ’ assessment of the banking sector ( ratings ) and, subsequently, to the assessment of albania ’ s economy ; – provides conditions to better manage debt collection, but always accompanied with the necessary message that this does not imply forgiving the borrowers debt. in our case, the process of loan loss write off from banks ’ balance sheet is not a detached process from real developments. on the contrary, it reflects the gradual improvement in nonperforming loans. in concrete terms, over the last two years, the growth rate of non - performing loans has decelerated at extraordinary rates, banks ’ annual spending for provisions has fallen, and new loans, especially those denominated in lek, have been stable. on their side, banks have been increasingly committed to this process. usually, it happens when the effectiveness of the process improves and / or banks expectations for lending improve. ladies and gentlemen, i would like to point out that although the credit quality has improved, the level of nonperforming loans is considered as still high, and it should be lowered at a faster pace. this is a complex process that puts to test the adequacy of the legal framework, as well as the coordination and consistent implementation of institutional policies. these challenges were identified in the annual forum organised in june. some of them acknowledge the need for improving the legal framework. others point to unifying, in a single law, important stipulations about the execution of executive title, which are currently envisaged across several laws. we should be aware that a part of the difficulties arise from the dimensions of this problem ; also, until a while ago, the justice system lacked the experience and specialised expertise on these matters and is still facing inadequate capacities to handle such practices. however, inadequate legal provisions and their inconsistent implementation in practice render the collateral execution process tedious, uncertain and costly for the parties involved. the coordination of institutional policies is another key process to respond to various problems in a timely and

##aligned ” much of the time. but such a simple calculation alone isn ’ t the right metric. for a start, over the course of a business cycle the exchange rate should move in ways that help to maintain overall balance between demand and supply. in a period of strong demand it will rise, spilling demand abroad by lowering prices for traded goods and services. this lessens “ competitiveness ” in the short term, but helps preserve it in the longer term by maintaining discipline over domestic costs. moreover, the level of relative unit costs in, say, manufacturing, that is “ needed ” is a function of several factors, including the terms of trade. a country with an endowment of natural resources will find that when those resources command high prices, it will have a high exchange rate and low manufacturing “ competitiveness ”, compared with the situation when the terms of trade are low. the high resources prices draw factors of production towards the resources sector, pushing up labour costs for other sectors and drawing capital from abroad, so pushing up the exchange rate. the terms of trade rise is an income gain, and may well prompt an expansion in investment in the resources sector. hence aggregate demand is likely to increase, which among other things will also require a higher exchange rate than otherwise to maintain overall balance. these forces diminish “ competitiveness ” for other traded sectors. at a later stage, when those adjustments the capital stock have occurred, the exchange rate may be lower than at its peak, though still higher than what would have been observed had the terms of trade not risen. so it is not surprising that the exchange rate responds to changes in the terms of trade. it is nonetheless striking how close the empirical relationship has turned out to be. of course it is not to be assumed that the parameters of that particular empirical relationship are necessarily optimal. but nor is the contrary to be assumed. over the thirty - year period since the float, that relationship seems not to have led to long periods of the economy either having excess demand or supply. australia has had one serious recession in that time, in 1990 – 91, and the principal cause of the depth of that downturn was asset price and credit dynamics, not the exchange rate. overall, variability of the real economy has been lower in the postfloat period. while there are several factors at work in producing that result, the flexible exchange rate is clearly one. my conclusion, then, would be that evidence of large and persistent exchange rate misalignments