regulatory regime and policies against each other and try to reach some kind of lowest common denominator throughout the region. countless times we have heard the complaint “ why are you not allowing this, your neighbors do! ”, and i ’ m sure others people in this room have heard it too. during the crisis, we experienced several cases of countries trying to seek individual solutions to common problems. while fully respecting the idiosyncrasies and different timing priorities of each country, i think we would all benefit from a more collegial approach to regulation. on a national level, i believe the stress should be on supervision of systemically important financial institutions, with the right care not to create wrong perceptions related with moral hazard. in our region, these institutions are typically banks. in my view, these banks should become subject of a more stringent regulatory framework, in terms of capital and liquidity requirements, business and risk profile, including contingency plans. the supervisory authority should always be prepared for the worse and make sure that crisis management procedures are complete and tested. in this process, valid recommendations of international organizations will be closely followed for adequate implementation over time. it is important to have close coordination with other public authorities in the country, including government. 3. anchors of macro - prudential policies the role of anchors in monetary policy is well known. i mentioned before that an important lesson from the crisis for authorities would be to rigorously pursue countercyclical policies. i would like to stop a bit here and focus on this issue. i believe that albania was prepared for the crisis because imf programs have played an important role as a credible foreign anchor for economic policies. the imf programs and similar eu membership process have played a similar role in all cee and see countries. however as the countries have matured out of these programs or joined the eu, the political incentives to continue fiscal consolidation have been fading away. current events show that the symptoms have spread to other older members of eu, where such policies become the reason behind instability. therefore the role of anchors is very important for preserving and safeguarding financial stability. sound, clear and enforceable fiscal rule would be an important step. effective supervision based on simple and clear capital adequacy and liquidity rules would be another. the basel iii accord is a first step in the right direction. a unified approach and technical toolkit to stress - testing exercises would be also helpful. the joint stress - test exercise conducted by

lack of transparency, both in the instruments themselves and in the markets more broadly. the complex structures of the innovative instruments, and the lack of transparency with regard to the underlying assets backing these instruments, made them more difficult and costly to value than many investors originally thought. at the same time, many investors realized that it was difficult to identify where the risks were lodged. this uncertainty, of course, is one of the trade - offs of a more market - intermediated finance system in which risks are more widely dispersed rather than concentrated in the banking system. as problems in the subprime mortgage market became more apparent, investors became unwilling to purchase products that could have any exposure not only to subprime mortgages, but to housing - related assets and other structured products more generally. put simply, investors suddenly realized that they were much less informed than they originally thought. in these circumstances, it is not necessarily surprising that investors pulled back from purchasing certain instruments at any price. prospects for market recovery in light of these factors, what is the prognosis for recovery in markets for complex structured credit instruments? i would suggest that, while we have seen more normal price discovery activity slowly returning to some markets, the recovery may be a relatively gradual process, and these markets may not look the same when they re - emerge. both investors and sellers will need to take steps for the price discovery process to be re - established in these markets. in observing the challenges to price discovery and the repricing of risk in many markets recently, i have been reminded of a russian proverb that was made famous in the context of international relations but applies equally to investment decisions : " trust, but verify. " let me explain. as i mentioned earlier, one of the reasons that the price discovery mechanism has broken down in some u. s. markets in recent months is that a number of investors failed to exercise due diligence and relied on rating agency assessments. that is, there was a lot of trust but not much verification. i would suggest that the value of independent due diligence on the part of investors is especially high for newer and more - complex products compared with more traditional, familiar, and less - complex products. reducing the chance of unanticipated losses may require significant effort on the part of investors looking to purchase complex structured products and the creators or sellers of those products. to be able to better understand the risk profile of such instruments, some market participants will have to invest in three ways