the escb is the right way forward. i would however encourage broadening its scope in candidate and potential candidate countries of cee, in order to have a unified measurement system throughout europe. lastly, other measures of financial imbalances such as excessive asset price increases, under - pricing of risks, search for yields and increased risk taking need to be better incorporated in the standard models used by central banks. conclusion in the light of this discussion, a central bank could not avoid the responsibility of engaging to protect financial stability, even though this is not defined as a particular mandate. our experience as an emerging country indicates that price and financial stability are preconditions for each other. our motto is that any investment that we make in financial stability today will return high benefits in price stability in the long run. concurrently, i think our collective experience throughout the crisis showed that more can done in order to develop and institutionalize the proper mechanisms that would allow for better fx liquidity management in ee countries. a mechanism such as the vienna initiative that would encourage the commitment of parent banks to their ee subsidiaries and would discourage their financial disintermediation in these countries can be made permanent with added benefits to all the stakeholders. furthermore, regulatory harmonization can be improved and regulatory arbitrage can be mitigated. on macro - prudential policies i argued on the need to develop specific anchors that would make more credible, transparent and therefore achievable the goal of financial stability. measuring financial stability, or instability, might be difficult but that should not discourage us from trying. thank you for your attention. box 1 measures taken in the banking supervision area during the pre - crisis period. on june 2007, the new law on banks in the republic of albania entered into force. this law stipulates rigorous principles and rules on the risk management, aiming at protecting the depositors, investors and fostering the banking system ’ s stability. on january 2008, the credit registry started the operation representing a vital infrastructurerelated development. on march 2008, the bank of albania adopted a package of regulatory amendments which were generally oriented to adopting more conservatory policies in several main directions of day - to - day commercial banking running. in more concrete terms, this therapy can be described : in compliance with the new law on banks in the republic of albania, new quantitative thresholds were set for the calculation, supervision and reporting of banks ’ large exposures to parent banks and related entities. in order to better diversify

effects of the crisis. i believe albania is such a country : we had no bank failures or public injections of capital ; we did contain and reverse the confidence crisis in the financial system and its adverse effects. in fact, we did not experience financial disintermediation ; we did continue to grow, albeit at a slower pace ; we did manage to keep inflation expectations anchored. therefore, i will share with you our thoughts and measures throughout this period. to conclude this topic i will briefly summarize my personal lessons from this crisis. before the crisis, bank of albania was concerned for the possible financial threats that were being accumulated during the years of fast financial intermediation. to illustrate the point : most of the credit growth went in the non - tradable sector, with services and construction accounting for most of the expansion. at the same time, more than 70 percent of total credit was in foreign currency with euro making the biggest share of the outstanding stock. the tune of that period was the same in the entire region. the overall impression that the financial innovations had reduced the risk and the abundant global liquidity created a very optimistic picture. despite some truth in this, the pace at which financial intermediation grew annually was frenetically high. in particular there were two main aspects of financial intermediation that were particularly troubling in my opinion. first, economic agents created financial excesses using mostly the financial system. while meeting their needs, the financial system aligns and matches agents ’ positions according to length of maturity and liquidity. this holds true under the assumption that all claims and obligation will be fulfilled in timely manner in the same order. otherwise if they violate this assumption and end up overlapping each other than financial system might become unstable. our concern was that too many gaps were opening to fast and the albanian economy seemed to experience some sort of what latter came to be named as risk - taking channel. second, there appeared to be a general mispricing of risks from the banking sector. high concentration in particular sectors or clients indicated undue risk analysis or risk management from banks, while lending to un - hedged borrowers in a flexible exchange rate regime seemed to be a potential moral hazard issue. we addressed the first issue through increasing information sharing and facilitating the dialogue between the monetary policy and the financial stability and supervision of the bank. normally, the foresight of monetary policy is from the trough to the pick of the business cycle because it is mandated with smoothing the