ardian fullani : achievements and challenges of the albanian banking system speech by mr ardian fullani, governor of the bank of albania, at the open forum with the albanian banking system ’ s players, tirana, 29 september 2008. * * * dear heads of commercial banks operating in albania, dear participants, it has almost been 6 months since the first open forum was held, at the core of which were the achievements and challenges of the albanian banking system. today ’ s forum is a follow - up of the debate which commenced 6 months ago with the good will and goal to further bolster the banking system ’ s stability in albania. i consider the first forum a successful one, given that it generated a number of important decisions that have been made recently. in addition, i have the strong conviction that the discussions to be held this afternoon will be productive and will serve to the prudent examination of the banking system ’ s activity, in particular in the context of the recent developments in the global financial markets. to begin with, i would like to provide a general overview of the banking sector ’ s financial situation and the extent of impact from the developments in the international financial markets. during the first half of 2008, the banking sector maintained its stable growth pace. the albanian banking system is lucrative, well - capitalized and liquid. the good financial result continues to be driven by the rapid growth of high return on investment activities. as of end june 2008, credit portfolio of the banking system accounted for nearly 43 % of total assets, increasing by 3. 6 percentage points relative to end - year 2007. consumer deposits remain the main funding source for the activity, accounting for 80 % of total assets. business funding through the credit lines from the parent banks increased to 9 % of total assets in the first half of 2008. as of end june 2008, return on average assets was estimated at 1. 3 % while return on average equity equalled to 16. 6 %. capitalization indicator of the financial sector, and in particular of the banking one, increased slightly. capital adequacy rate of the banking sector showed a slight increase to 17. 3 % as of end the first half of 2008. liquidity indicator continues to remain at higher levels compared to the other regional countries. liquid assets of the banking sector share 47 % of total assets, dropping by about 5. 7 percentage points relative to end - year 2007. the spread of the u. s. economy crisis to the international financial markets

into the consolidation stage, our banking systems still remain fragile, and as such, they require greater commitment and care. regardless statistical developments, the scale of financial intermediation is relatively low, whereas time after time the shadow of shocks on the economic equilibra shows up itself in different countries. future changes will not be simple at all, but all of us together, by exchanging experiences and necessities for change, will build a safer environment, which i hope will make future challenges somewhat easier. granting independence to central banks represents one of the most relevant steps in the financial system reform in the countries of our region, as an important precondition for maintaining inflation under control and becoming an escb member. however, our endeavours for the consolidation of the institutional and real independence should be coordinated carefully by taking into consideration the specific features of our economies in transition, and not as a mere implementation of what may seem to be a successful model for the escb countries. in this framework, i consider today ’ s meeting as very important, since the bulgarian economy and the bulgarian national bank have been going through substantial reforms in the context of eu accession. i believe that the challenges that we have faced and those that we will face in the future are more or less the same with those experienced by the bulgarian authorities, including the bulgarian national bank. as a consequence, i think that the bilateral cooperation between our banks carries a high potential, and in the name of my institution, i avail myself of this opportunity to offer maximal guarantees with regard to the fruitful development of these relations. 1 / 2 passing into a multilateral framework, i will return once more to the idea that focuses on the institutionalisation of the inter - regional cooperation between central banks. if we look to the meetings organised with some of the regional banking authorities, the initiative on regional cooperation has been welcomed, but i also believe that time has come to carry out concrete measures towards this cooperation. judging from my personal experience, not as governor but as a banker, i hold the opinion that it would be appropriate to establish a club of regional central banks. the regular meetings of this club would certainly enable the exchange of experiences and the further strengthening of our cooperation. 2 / 2