of loss - absorbing capital relative to all of a bank's assets and off - balance sheet exposures regardless of risk weighting ; page 10 of 19 ( v ) liquidity requirements - a minimum liquidity ratio, the liquidity coverage ratio ( lcr ), intended to provide enough cash to cover funding needs over a 30 - day period of stress ; and a longer - term ratio, the net stable funding ratio ( nsfr ), intended to address maturity mismatches over the entire balance sheet ; and ( vi ) additional requirements for systemically important banks, including additional loss absorbency and strengthened arrangements for crossborder supervision and resolution. in india, basel iii capital regulation has been implemented from april 1, 2013 onwards in phases and it will be fully implemented by march 31, 2019. the latest round of reforms published by the basel committee in december 2017 have implementation timelines stretching up to 2022. having understood the background for basel regulations, let us go back to the issue of mitigating expected and unexpected losses in the credit portfolio, which, among other reasons, arise due to loans turning bad, leading to non - recovery or underrecovery of the loan. once a loan is recognised as a non performing asset ( npa ), the prudent action is to start recognising the expected losses from that loan upfront so that when the actual losses do materialise, the impact on the profit and loss statement of the bank is spread over a period of time. since expected losses can be reasonably estimated based on past experience, the provisions to cover the losses are made from the current earnings of the bank. provisions can be thought of as an expense from the income of a bank to mark a non - performing loan to its economic value in the books of banks. sometimes, the actual realisation from a npa could be higher than its marked down value, in which case banks write back the excess provision as profits in the accounting year in which the recovery takes place. provisions can, as such, be also thought of as prudential devices that smoothen the impact of bad loans on profit and loss of banks, and not as a forced expense mandated by the regulator. the basic prudent behaviour always demands that banks should never be under provided. ideally, banks should be able to test the loans in their books for expected losses and make provisions for such losses without any regulatory intervention. however, in the absence of robust models built by our banks that would

incorporated in the list of main priorities for bank of albania ’ s institutional approximation to the model applied in the european system of central banks. in addition, in light of addressing these priorities, the european commission decided to allocate eur 800 000 as under ipa 2015. after a long process of consultations and sharing information, for the first time, bank of albania ’ s experts put together a twinning project, which was submitted to the european union delegation to albania. at the end of the process, banca d ’ italia and deutsche bundesbank were selected to implement bank of albania ’ s project. banque de france and national bank of romania are also part of the team for certain components of the project. we feel privileged, certainly, by this close partnership with these two major central banks. relations with these two institutions date back to quite early in the history of the bank of albania. 1 / 2 bis central bankers'speeches whether multilaterally or bilaterally, they have assisted for many years the bank of albania achieve its objectives and operate like a modern and reliable institution. i am therefore optimistic about the success of this next project, irrespective of the relatively tight agenda and deadlines. now, let me briefly introduce you to the main components of this project. it will involve eight departments at the bank of albania and will address important issues, grouped as follows : 1. banking supervision and financial stability 2. monetary policy and statistics 3. internal audit 4. payment systems 5. other central banking functions such as human resources and european integration for each component, measurable results have been envisaged, which will be translated into regulatory documents, guidelines and specific recommendations related to policies. all outcomes will aim to approximate the final product at a higher level to standards and models of the european system of central banks. dear ladies and gentlemen, i hope that this project will deliver long - term results, and will strengthen the regulatory and operational frameworks at the bank of albania, an institution that makes substantial contribution to the sustainable economic development of albania. on behalf of the bank of albania, let me iterate our readiness and commitment for the successful implementation of the twinning project, as we strive with professionalism and responsibility to achieve its objectives. concluding, i would like to thank the european commission, for its support in securing funding for this project. i am certain that the commission will continue to support future initiatives of the bank of albania, as we deal with approximation challenges and endeavour to progress