ardian fullani : the link between the legal system and financial markets speech by mr ardian fullani, governor of the bank of albania, at the banking law workshop, tirana, 17 november 2008. * * * dear everyone, the conviction that two monologues do not make a dialogue not only pushed me to study law after my economics studies but also to listen to and toss ideas with colleagues from different professions. i find it especially pleasing when i do this with lawyers, given that there is one particular person i talk to the most – my spouse. the dialogue between the banking market and the legal system has always been important to any country. nowadays, it has become extremely vital. for our country to continue sailing towards safe shores of economic development, financial stability and prosperity, i believe these two oars are required : judicial order and the financial market. dwelling briefly on the legislation issues, i would highlight that the economic activity is mutually dependent on the legal system at home. as one of the distinguished economists and academics, mr. mishkin, says – ” the legal system, which as you know, is not only composed of legislation and rule books, but also of the infrastructure of the civil courts and the market regulators, represents a fundamental determinant of economic growth, especially in connection to financial development ”. the link between law and finance is inextricable. the financial instruments do not operate in a vacuum. as long as they serve to people, they are based on legal relationships. a financial asset is ultimately a claim in the form of paper ( contract ) or electronic form ( account entry ). in any credit relationship, the possibility of default is always looming and this inherent complication cannot be solved without a precise system of norms that protects both the creditors and the debtors. as shakespeare ’ s merchant of venice reminds us, the legal system has to ensure that the debtor does not walk away from his obligation. at the same time, the lender cannot be too taxing for the debtor. hence, as anywhere else in life, the balance ( that is, the balance of justice ) should provide for the wellbeing of the financial system, which is based on these classical relationships, no matter how much modern they are. fundamentally, the legal system should ensure that contract and property rights are sufficiently clear, protected and predictable. in more concrete terms, the parties should not only be aware of these rights, but also exercise them freely and fully during the binding

market functioning and regulation and believing that the market and the right are dynamic, the bank of albania has supplied the banking market and the banking right with a new instrument – the repurchase agreement. by means of the law on repurchase agreement and the master contract, the bank of albania has initiated a process which needs to be further developed by the specialists of the area. personally and institutionally, we are expecting these efforts to be concluded with the execution of the first transactions of this kind. it is for this purpose that i invite all the participants in this workshop, which for the first time has brought together judges, prosecutors and lawyers from the banking market, to be active and complement one another. with the conviction that our initiative will be followed by other similar activities in the future, i wish you good proceedings. thank you for your attention.