. regarding the future prospects for credit flows it can be noted that stable funding sources ( loan - deposit coverage ratio of around 90 % ), strong liquidity position, and capital adequacy ratio continuously being twice as high than the minimum required, point to room for further increase of lending in the domestic economy. the improvement of the banking sector regulation in view of further implementation of the basle and eu standards will remain being a high priority on the agenda in this field. in general, the current macroeconomic developments and the expected future outlook indicate a moderate recovery of domestic economy ( considering expected developments for the economies of the most important trading partners and domestic drivers of growth ), inflation rate in line with the expectations, a balance of payments position that ensures a comfortable level of foreign reserves and still slow credit flows. these assessments created an environment for monetary relaxation, as a contribution to higher credit growth and thus, support to the domestic economy. on that basis, in january, we reduced the key interest rate on cb bills from 3. 75 % to 3. 5 %, which is the historically lowest level. since january 2013, the changes in the reserve requirement instrument came into force, through reduction of the base of banks ’ reserve requirements by the amount of newly approved loans, but only for credits to sectors whose growth reduces the external vulnerability of the economy ( net exporters and energy sector ). this non - standard measure will be in effect until the end of 2014, when the need for further application will be examined. these changes in reserve requirements have already started to contribute to higher lending to previously mentioned sectors in the economy. just last week, we have done yet another change in the reserve requirement by reducing the reserve requirement ratio on denar deposits from 10 % to 8 % and simultaneous increase of the reserve requirement ratio on foreign currency deposits from 13 % to 15 %, as well as introducing 0 % reserve requirement ratio on banks ’ long term liabilities to nonresidents. by this measure, we are aiming to : support the process of deeuroization in the economy, inject liquidity in support of lending to the private sector and stimulate higher inflows from nonresidents especially from financial institutions. last, but not least, i would like to point out our efforts in strengthening our statistics in the last few years. in march 2013, the national bank of the republic of macedonia started transmitting the quarterly balance of payments and annual international trade in services data to eurostat, while in may

for domestic banks and monetary policy implementation in our countries. the liquid assets of our domestic banks are composed at large portion of domestic cb - bills and t - bills and accordingly, they are without investment rating ( s & p bb with stable outlook ; fitch bb + with sable outlook ). this could cause serious disruption of design and effectiveness of monetary policy. possibly, it could ask for transition from market based instruments to direct measures - such as reserve requirement. another challenge is to straighten the coordination with the home - host supervisory authorities. it is extremely important and central to the country ’ s financial stability. nbrm is adequately included in the operation of some of the supervisory colleges, but not for all bis central bankers ’ speeches macedonian subsidiaries of foreign banks. as a result, nbrm is not always adequately informed, which could harm its ability to effectively determine the necessary capital level of these banks. in addition, there are still some unresolved gaps in regulatory coordination between home and host countries in the eu single supervision mechanism. and last but not least, the future challange will be impact of single resolution mechanism for a european banking union to our banks and the prospective scaling - back of unconventional monetary policy that could affect the borrowing costs. summing up, the ongoing international regulatory reform, though primarily intended to promote financial stability, may also have some unintended adverse effects on emerging and developing economies, with see region not being an exemption. given the similarity of the financial systems, the see region as a whole faces similar challenges also sharing the common concerns. this raises considerations for stronger regional cooperation as important tool to effectively address future challenges. the recent bank of albania ’ s initiative for region ’ s joint participation within vienna initiative 2. 0, advocated by the bank of albania as steering committee member, can be considered as a huge step forward in building consistent cooperation framework. in it ’ s very first joint initiative, the region focuses on homehost coordination including the confidentiality, cooperation and exchange of information between supervision authorities in the home and host countries, the need for eu banks to adequately adapt their strategies to local needs in host countries as well as some coordination issues among non eu host countries and ecb / ssm. the nbrm strongly welcomes this joint cooperation initiative hoping for it to highly contribute toward strengthening region ’ s effectiveness in tackling various future problems that concern as all. bis central bankers ’ speeches