ardian fullani : overview of albania ’ s economy and banking sector speech by mr ardian fullani, governor of the bank of albania, at the 4th bank of albania forum with the albanian banking system, tirana, 14 april 2010. * * * dear commercial bank managing directors, dear guests, i would like to welcome you to this periodic meeting, which aims at providing a platform for the exchange of ideas and presentation of viewpoints related to the developments affecting banking and financial activity in general, and which are focal to the financial system ’ s stability. yesterday the supervisory council of the bank of albania approved the financial stability report for the year 2009. this is the third issue of the financial stability report and it is my pleasure to state today that now we do have a consolidated product, which aims at being in full compliance with the best standards. the conclusions derived from this report confirm that the albanian banking system experienced an unusual liquidity situation in 2009 and has now entered a period of full recovery. the satisfactory growth rate of deposits, in particular over the recent months, attests to the restoring of public confidence in the banking system. moreover, the conclusions of this scientific research confirm that the albanian banking system is sound and stable and provides full guarantee for the mobilization of the public savings and their channelling into boosting economic activity in home. i avail myself of this opportunity to invite all participants in this meeting, the decision - making and governmental authorities, the media and the public at large to address to this report. only in this way you will better understand the current situation, the achievements made so far and the challenges to be faced in the future. in what follows, i would like to provide an overview of the economic situation at home, and later dwell upon the banking sector ’ s present situation and outlook for 2010. credit quality and banks ’ transparency to their customers are two issues i particularly chose to focus on. according to instat ’ s preliminary assessments, albania posted a positive economic growth of 3. 3 percent during 2009, despite the impact of the international financial and economic crisis. the financial system, dominated by the banking sector, was stable and the fiscal and monetary stimulus mitigated the difficulties of the real sector of the economy. this growth rate is very close to the early 2009 projections made public by the bank of albania. among the factors that boosted economic growth over the course of 2009 we can mention the public authorities ’ measures to rapidly restore public confidence in the financial system and the banking sector

depositors ’ income and the stimuli set by banks to orient the structure of savings. the bank of albania will continue to provide the necessary liquidity to the interbank market. as far as the financing lines and shareholders ’ capital are concerned, the bank of albania will continue to require from banks that they maintain the necessary amounts not only in order to carry out a normal banking business and comply with the regulatory framework requirements, but also in order to support the recovery of banking business at well - controlled risks. with regard to bank investments, the bank of albania expects higher lending rates by the banking sector in 2010 relative to 2009, with the largest part of growth expected to take place in the second half of the year. in terms of risk assessment, in the short - term, the banking sector ’ s financial situation has benefited positively from the following developments : a ) substantial improvement of liquidity situation against a background of public confidence recovery and stable deposit growth. it is assessed that during 2009, the annual growth of public deposits was 7. 6 percent, rising to all 694. 3 billion. presently speaking, the deposit level has exceeded that of end september 2008, prior to the beginning of the deposit withdrawal. the growth rate of public deposits would have been higher if the situation in the real sector of the economy had improved and the banking sector lending had recovered. b ) lower growth rate of the banking sector ’ s risk - weighted assets. during 2009, the growth of the banking sector ’ s risk - weighted assets reduced substantially, owing mainly to the much lower growth rate of lending and the lower expansion of banking business in general. in fact, during 2009 the banking sector increased lending by about 13. 2 percent, compared to the growth by about 35. 7 percent in 2008. it is assessed that all loans grew about 23 percent, while foreign currency loans grew about 9 percent. however, in real terms, the real growth of foreign currency lending was negative. c ) the devaluation of the national currency exchange rate during 2009 is assessed to have been at a reasonable rate and extent, providing the banking sector and other economic agents with the necessary time to take adequate and protective measures. there are great expectations for a stable exchange rate during 2010. however, the movements in the exchange rate against a background of a flexible regime are normal and should be an expected phenomenon by the economic agents and which they should be prepared for. in the medium term, the banking sector should cope with the impact that the loan quality performance