gent sejko : overview of economic and financial developments in albania address by mr gent sejko, governor of the bank of albania, at the 2nd conference of the albanian association of banks, tirana, 14 november 2017. * * * your excellency prime minister, honourable minister ahmetaj, dear chairman of the albanian association of banks, ladies and gentlemen, it is a special pleasure for me to participate in the second conference organised by the albanian association of banks ( aab ). i take this opportunity to compliment the aab for the selected theme, as economic growth in albania is cross - cutting topic of interest to all of us. this conference takes place at an interesting moment from the perspective of the performance of economic activity in albania. the most recent assessments show that our economy has entered into a long - term recovery trajectory. as mentioned in the last statement of the supervisory council of the bank of albania, the albanian economy grew 4. 1 % in the second quarter, driven mainly by the recovery of private domestic demand, improvement of the international trade balance, and increase in public spending and high foreign direct investments during this period. the accommodative monetary policy of the bank of albania has been one of the key driving factors for the recovery of domestic demand. it has constantly guaranteed a financial environment with low interest rates and ample liquidity. it has also been aided by the consolidatory fiscal policy, which, in addition to reducing risk premia, has increased the space for financing the private sector. our expectations for the short and medium - term economic developments in albania remain positive. we aim at having sustainable growth rates in the course of the years. in this context, the banking sector represents a key industry for supporting economic recovery. the instruments it avails have a substantial contribution in this regard, with lending being among the most important ones. notwithstanding occasional volatilities, the banking industry has played a significant role in supporting economic activity. that was notably the case at the early 2000s, following the privatisation of the then savings bank. during that period, the outstanding credit increased at considerable annual growth rates. anyhow, such high growth rates and the outburst of the global crisis revealed a number of inconveniences, and led to the perpetual increase in the level of non - performing loans. thus, the ratio of non - performing loans to total loans peaked 25 %, extremely deteriorating the system's lending capacities. the reasons that led up

approach, the advanced approach, should be mandatory for major banks. it must be said that in the usa, europe ( the european union ), all systemically important banks have already switched to advanced approaches. this approach allows banks to more accurately assess capital and improve their own risk management system. and the greatest savings in capital will then be enjoyed by banks with a high - quality loan portfolio. we have also prepared an advisory report on this topic and will publish it shortly. we will then be ready to discuss it in detail with the banking community. now let ’ s look at the concentration risk for systemically important banks. this is a sensitive topic for our banking sector if we look at the history of it. it is objectively due to the fact that our largest corporate borrowers and enterprises are larger than our largest banks. and in conditions where syndicated lending is not developed, an accumulation of risks for individual large borrowers can create vulnerabilities and risks for banks ’ stability. we are currently discussing introducing a new standard, which will differ from the current concentration standards ( n6, n21 ) in that a banking group ’ s assets will be included in the calculation of n30 without risk weighting and will be correlated with the core capital rather than total capital. this, in our opinion, will make it possible to more accurately assess these risks and take into account risk transfer channels and the spread of risks across the group that forms banking groups. we have prepared a draft regulation and plan to discuss it with the banking community. in any case, the introduction of the standard will not take place earlier than 2022. there are, indeed, many topics that need to be discussed, and we are ready to discuss them. as you can see, i have already listed several of the consultation papers that we are publishing. and we will adhere to the practice that was and is in place and think is useful. all innovations that affect banks, will be discussed conceptually as advisory reports, then we will give everyone time to discuss the draft regulations themselves, and then give everyone time to implement these regulatory acts. at the request of the banking community, we have introduced the practice of a release approach. as you know, we are trying to package all changes to regulation in such a way that they come into force twice a year : on 1 april and 1 october. this is because we understand that these implementations require that it systems be developed because almost everything is now tied to it. we want banks to