another country. the ease with which firms can circumvent national borders and regulatory jurisdictions is a challenge of one dimension. if circumvention results in unsafe or unsound banking practices, it is a problem of another dimension. the problem may end up back in the united states after all. it is for these reasons that the federal reserve and the other u. s. banking agencies have been advocating that international agreements on banking supervision have a risk focus. for example, the basle committee on supervision ( under the bank for international settlements ) recently agreed to embrace a portfolio - based, risk - sensitive approach to setting capital requirements for market risk. instead, supervisors will be building upon the processes banks use to measure trading risks. this should substantially reduce regulatory burden and make standards more compatible with industry practice. in addition, the basle committee has agreed to common frameworks for gaining information on the derivatives activities of supervised institutions. a major task before us is to work with emerging - market countries to strengthen and unify banking supervision. greater consistency should reduce the risk of systemic problems arising from a financial disruption in any particular market. while most of these efforts have focused on market risk, i think it is fair to point out that the major exposure for most banks is credit risk. looking to the future, will the risk - based capital approach for credit risk ever evolve into an internal models approach? the answer is probably yes ; however, with credit - risk modeling in such an early stage of development, it is premature to predict just when credit modeling and the supporting data will develop to the point that they can be relied upon as effective management tools. i am, however, encouraged by progress in modeling credit risk. the risk - based capital accord has worked well in the past and remains useful today. it was an excellent vehicle for bringing about a convergence in bank capital standards worldwide. but it does illustrate the problems of a standardized scheme. for example, banks have an incentive to securitize low - risk assets to avoid regulatory capital charges that unregulated competitors need not meet. alternatively, market participants can get a false sense of security about a bank ’ s condition if the risk - based capital ratios understate the true risks of the bank ’ s portfolios. recognizing these shortcomings, we regulators need to continually review and revise our standards, as we have proposed in connection with certain securitizations of assets. conclusion some of you in the audience may be surprised

sovereignty. unfortunately, as i stated earlier, these anchors are currently being jeopardized by internal factors. driven by short - term perceived benefits vis - a - vis the real costs of the correction process, the public, the business community, syndicates and stakeholders ask for short - term concessions from the institutions, and particularly from the central bank. judging on the benefits, they require shifting the focus from the objectives and traditional instruments our institutions have been mandated for. these short - term perceived benefits, seemingly, have the potential to offer a right and moral solution to sovereignty versus stability, but they bear the risk of causing the loss of both in the long run. political and institutional factors have not addressed yet some important concerns identified by the bank of albania to have caused financial stability - related concerns and decelerated economic growth in albania. i refer here to collateral execution, lowering of perceived risk arising from the severe political situation and lack of consensus, deceleration of reforms required by the european commission and receiving eu candidate country status, severity of political warfare, and use of the economy and the situation for political gain. lastly, the bank of albania notes that the albanian economy remains under the pressure of market developments in our main trading partners and their economic and financial policies. the measures taken by our trading partners to enhance confidence in their financial systems and adjust the macro - financial imbalances hamper monetary policy transmission in the economy. they heighten public concern and undermine its confidence in the future. these are the very reasons preventing the banking system to finance the economy and the government at lower interest rates and, consequently, the central bank ’ s monetary policy transmission to easing the monetary and financial conditions. what is currently happening represents higher risk premium in the countries of the region for all the reasons referred to earlier, rather than an increase in real interest rates. concluding, i would like to clarify that central banks should make their utmost to preserve the frail macrofinancial balances and bolster public confidence in institutions and the financial system. in this context, the bank of albania, as to date, will continue to foster macroeconomic and financial stability in albania. this is our major obligation arising from the constitution and relevant laws. we are committed to meeting this obligation with dedication and meticulousity. we are fully focused on these two major objectives, just like a good captain focusing on the horizon, rather than on the hands laid on the ship ’ s wheel. the bank of albania believes that, by guarantee