nature and outcomes of this cooperation. the crisis showed few weakness in the model of growth adopted by the emerging economies of south east europe, but is also true that, to some extent this behaviour was also encouraged by the development strategies of financial groups in the region, as it is also true that there was also some weakness in the coordination and collaboration between different european union institutions, such as monetary policies ( ecb ), fiscal policies ( of member countries ) and the inexistence of specific mechanisms ( such as bailout funds ) to safeguard the european union during difficult economic times. this conference pays homage to these lessons, while acknowledging the importance of coordination, by mutually collaborating in multidimensional institutional levels, within the region and with our common partner countries. we in the region hope that our foreign partners share this same view. bis central bankers ’ speeches the albanian economy and its financial market share similar characteristics with the other economies of the region. our main trade and financial partners come from the eu economy. therefore, developments in the eu are directly and indirectly transmitted and play an important role in economic developments in albania. our reliance on eu affected not only our economic development but also constrained the effect of policy measures. several european banking groups operate in the albanian financial sector. these entities brought into the albanian market a lot of valuable know - how and experience, playing, thus, a crucial role in the financial integration of the albanian economy to the european union. however, eu supervisory regulations and risk requirements for european financial groups, along with the approach in which they are implemented, are posing significant constrains on our economy and the efficiency of monetary policy to respond to economic developments. faced with new and stringent capital and risk requirements, banks are trying to comply by adjusting their future business plans and the size and composition of their balance sheets in the economies of the region. these tighter regulations approved by european supervisory and banking authorities and, subsequently, implemented by parent banks have already been accompanied by a decreasing level of credit to the economy. our research shows that further tightening of crediting, due to the legal reforms currently under way, could have an important effect not only on economic activity but also on commercial bank asset quality itself, in particular situation with non - performing loans. a deterioration of economic activity would play out mostly in the same way, leading to worsening of npl ratio, leading to smaller banks ’ profit and tighter capital constrains, along with slower growth. this second channel is seen as arguably more

dangerous, with the empirical research pointing out that the elasticities are close to twice as large for a shock of similar size. such adjustments are imposing significant constrains on our economies. more directly, we have observed a decrease in financial intermediation, by tightened lending procedures even for economies or sectors that were doing ok during the crises. as a result, this was reflected in stagnating investments and slowing down dynamics of the albanian economy, both in the private and public sectors. moreover, current business practices and policy orientations are imposing significant constrains in the efficiency of monetary policy transmission mechanism, and the ability of authorities to provide much needed stimulus to the economy. it is understandable that banks would have to be careful, prudent and responsible given the current situation with non - performing loans ; however, they must also consider the fact that credit and financial intermediation is important for growth, which, in turn, can improve the ability of economic agents to repay their loans. this is especially true for particular sectors like agriculture and agro - business, which, so far, have not benefited from credit expansion, but have large untapped potential for growth. the era of an economic growth model, led mainly by the domestic consumption, is now gone. banks, their european headquarters and their supervisory authorities should work together with authorities of host countries to develop a new long - term and sustainable economic growth model. this new model needs to be based on investments in productive sectors of the economy. our products and services need to be competitive not only in the home market, but they should also offer comparative advantages in the regional and european union markets. it is clear that cooperation is the only choice for the future. for more than 15 years now, the european integration, in all its politic, economic and financial dimensions, has been main driving force for the economic and social prosperity of south east european region. eu represents the main trading partner, a large share of fdi, by far the biggest investor in the banking system. our countries have undergone through structural reforms, adaptations of regulatory and legislative frameworks, institutional adaptations to adjust to these partnerships. led by the european integration process, countries of the region have also signed bilateral free trade agreements among them. our studies at bank of albania show that these free bis central bankers ’ speeches trade agreements have positively affected trade flows among west balkan countries. however, these studies also suggest that trade flows among balkan countries are below their potentials. the aims