ardian fullani : economy and key interest rate in albania speech by mr ardian fullani, governor of the bank of albania, at the press conference on monetary policy decision - making of the supervisory council of the bank of albania, tirana, 26 may 2010. * * * the supervisory council of the bank of albania on its meeting of 26 may, 2010 reviewed and approved the monetary policy monthly report. taking into account all the latest economic and financial development at home and their projections on the future, at the conclusion of discussions, the supervisory council of the bank of albania decided to leave the key interest rate unchanged, at 5. 25 percent. * * * the improvement of the world economic activity, as shown by the sharp growth of the emerging countries ’ economies and by the moderate rise of the major part of developed countries ’ economies, has characterised the early months of 2010. economic recovery is accompanied by the increase of trade activity, in the meantime central banks and fiscal authorities have pursued to support the aggregate demand through easing policies. notwithstanding the climbing trend of commodities prices, the inflationary pressures continue to be still low owing to the negative gap of production. however, the events occurring in the last weeks have revealed that both euro area and world economies are characterised by high uncertainties as regard the future. the economic and political discussions are particularly focused on the fiscal situation. the implementation of quick and concrete measures, which guarantee the long - term stability of public debt, seems that shall condition considerably the future development. world financial markets have reacted tensely against these developments, being characterised by a high volatility and an increase of risk primes throughout the instruments variety, markets and financial agents. turning to the domestic economy, the latest qualitative and quantitative indicators show a slow performance of economy in the early months of 2010. the deceleration of domestic demand is compensated by a positive and growing performance of the albanian exports. the domestic inflationary pressures were low and the consumer price inflation declining. monetary markets revealed more calm, characterised by a dropping trend of interest rates, liquidity situation improvement of the banking system and a more stable performance of the exchange rate. however, lending to economy continues to maintain low growth paces. indirect and prior estimates suggest that the paces of private consumption have been controlled, conditioned by restricted sources of its financing and by the higher tendency of consumers regarding savings. the low level of capacities utilisation in economy, the low paces of loan for investments and the fall of capital and intermediate goods

costs beyond their individual dimension. through this new capital composition, the macro - prudential instruments manage the systemic risk before it materializes, decreasing the probability of occurrence and, after its materialization, minimizing losses that are absorbed by the higher level 2 / 5 bis central bankers'speeches of capital. but still a lot of work remains to be done. it has long been recognized that a deeper financial integration also brings a better functioning of the european union. yet, financial integration showed to be shallow and reversible and, after the financial crisis, fragmentation increased against centralization and integration. the measures undertaken to reduce liquidity within each country improved the national financial stability, but neglected the effect on other countries. the banking union addressed these inadequacies by concentrating the national financial policies at the central level and aiming to fulfil two objectives : to ensure banks ’ soundness and promote a deeper integration of the banking sector. the single supervisory mechanism plays an important role in these objectives. a stronger and more uniform supervision enhances banks ’ stability and provides them with a more coherent framework of policies on cross - border banking, producing benefits compared with the fragmented system of national supervision. as mario draghi says : “ let ’ s keep in mind that fragmentation starts with the decision by banks not to operate in regions where the risk - return of lending is judged to be insufficient to remunerate their invested capital ”. supervisors ’ advice for banks in the post - crisis period remain the same : banks should adapt the business model to be more effective and profitable, improve risk management and manage the cleaning of the balance sheet from legacy assets. despite the progress made, these tasks are yet to be completed and now is the most appropriate time to finalize them. the regulatory framework is clearer and more complete ( the implementation of basel iii is starting ), supervision is clearer in terms of methodologies and policies, and the application of fintech allows banks for new ways to do business efficiently. lastly, and more importantly, the overall macroeconomic framework is stabilised and the positive economic growth is stable. the framework presented above is a good guideline to address the remaining post - crisis challenges. is the adoption of international standards on financial stability safeguarding necessary? the answer is yes, because the globalization and interconnection of the banking sector needs the standardization of prudential regulation. however, while adopting international standards, it is important to keep in mind two issues : first, these standards have to adapt