revaluations and re - classifications. latest observation : september 2019. changes in the net external asset position of euro area mfis reflects monetary exchanges with the rest of the world, the dynamics of which has been driven in recent years by the net portfolio outflows that i have described, as can be seen in the monetary presentation of the balance of payments. by construction, this perspective abstracts from the banking sector ’ s autonomous actions. nonetheless, the net external asset position of the banking sector reflects their roles as intermediaries in cross - border payments and as issuers of the bank deposits that form the main instruments for international payments. [ 34 ], in this way, the monetary presentation of the balance of payments illustrates that external monetary inflows and outflows over the last decade have stemmed mainly from two types of cross - border activity : first, transactions of a financial origin ( dominated by international portfolio flows ) and, second, the proceeds from the significant current account surplus ( chart 16 ). in fact, this sizeable surplus represents a persistent source of monetary inflows that has tempered the impact of app - induced portfolio outflows on euro area monetary dynamics. chart 16 the monetary presentation of the balance of payments ( eur billons ; twelve - month flows ) source : ecb. notes : assets ( and therefore also net amounts ) of the portfolio investment and fdi are displayed with negative sign in order to match their related monetary flows. net external monetary flows are measured by changes in mfis ’ net external assets, adjusted for revaluation and re - classification, as reported by bsi statistics. latest observation : august 2019. the role of global portfolio rebalancing frictions in dsge models finally, a central question in assessing the impact of our asset purchase programmes is the mechanics of international portfolio adjustment. let me look again at the effects of asset purchases in the presence of portfolio rebalancing frictions, based on simulations of two open - economy models. in the dynamic stochastic general equilibrium ( dsge ) models considered here, asset purchases in the domestic economy drive down yields of domestic long - term government bonds and incentivise portfolio rebalancing. in particular, the strength of the exchange rate effect in the models depends on portfolio rebalancing frictions that operate both through a credit channel ( whereby banks sell bonds to the central bank and originate more / cheaper credit ) as well as an exchange rate channel (

at a good level, above 18 %, by enabling this sector to continue the activity of financial intermediation. in addition, credit quality slightly improved during 2020. the ratio of nonperforming loans fell to 8. 1 %, as at end of 2020, from 8. 4 % in the previous year. the measures taken by the bank of albania to help banks to deal with borrowers facing temporary financial difficulties for the restructuring of loans, created room for the stabilisation of the overall level of non - performing loans. thus, the bank of albania remains particularly attentive in monitoring this indicator. direct exposure of banking sector ’ s activity against risks remains contained, but some indicators of these risks have trended upwards. the banking sector remains sensitive to the exchange rate risk through the segment of unhedged loans in foreign currency. exposure to the interest rate risk remains present, but it is assesses as limited. the bank of albania has addressed these risks through regulatory actions of macro - prudential nature and through the macro - prudential policy instruments. uncertainty about economic developments in the presence of the pandemic remains considerable, and so do the challenges to the banking and financial activity. however, assessments of the banking industry and stress test exercises suggest that the banking sector has sufficient capacities to counter these challenges. after this panorama of the banking sector in albania, i will briefly highlight some of the main directions of the work of the bank of albania for strengthening banking supervision and supporting financial stability. the implementation of the recommendations from the committee of experts of coe on the evaluation of anti - money laundering measures and counter terrorist financing ( moneyval ). in the evaluation report of moneyval, financial entities, particularly banks, are evaluated with a high level of effectiveness ( “ substantial / considerable ” ), by undertaking, overall the appropriate measures for the prevention of money laundering and terrorist financing. also, the committee has provided a set of recommendations to the albanian authorities. in the framework of addressing these recommendations, the bank of albania is involved in the implementation of the national plan of measures accordingly, by performing the necessary completions in the regulatory framework and by strengthening the supervisory process. the number of examinations, with particular focus on the terrorism financing issues and implementation of international sanctions, has been increased. these examinations have taken place in non - bank financial institutions and foreign exchange bureaus. regulatory and methodological approximation and strengthening of supervisory capacities. the bank of albania has continued to work for the improvement of the