This is buttressed by the way in which the Bank’s Court of nonexecutive directors approaches its statutory responsibility of reviewing the MPC’s processes, involving annual bilateral meetings with each MPC member. And, externally, it is similarly underpinned by the Treasury Select Committee holding us individually accountable for our monthly votes, which are published as part of the minutes of our meetings. This establishes very powerful incentives for each member to reach their own considered view. There is no free-riding in the MPC; and our policy debates are full and free. That lies at the very heart of the MPC’s operation, performance and communications. Indeed, it might be wondered whether the tone of some of the public scrutiny could set up incentives to cast minority votes with the aim of demonstrating independence of thought and action. 23 That, of course, would be perverse. Each member wants their individual decisions to matter – to the current Bank Rate, and to the expected path of policy and so the monetary conditions embodied in the money market yield curve. One votes in a minority when one disagrees with the immediate decision and the strategy it might convey. Occasionally, doing so, with the reasons disclosed in the minutes, can be an effective way of influencing monetary conditions. The make-up of the MPC’s majorities and minorities shifts around over time. There are no “blocs” on the Committee. And there is no distinction between “internals” and “externals” in that respect.
Having a look at all the statistical indicators, it results that the banking system at that time it was sound and growing continuously. But, all this was insufficient since the memories of year 1997 (the collapse of fraudulent schemes) were still present and households sensitivity to them was very high. Inspite of the recent significant achievements I would like to stress that still there is a high potential of fragility in our economy and the entire region as well. As a consequence, I think that we have to be much more prudent and much more diligent when speaking about the financial stability of the country. This episode suggests, inter alia, the necessity to associate the reforms with concrete preparatory steps and, certainly, combined with back-up plans in the case of failure. For this purpose the market needs to be intensively prepared and elaborated since in early stages of the implementation of reforms. It is imperative that the decisionmakers should themselves know in advance the market behavior and sentiments. Last spring, a joint assessment of the Albanian financial sector conducted from both the International Monetary Fund and World Bank (FSAP) concluded that: the financial sector consists mainly of a regulated and supervised banking system. The Stress-Test indicated that the level of different risk exposure to the banking system is rather low, an argument that supports this conclusion. The banking system has experienced remarkable developments over 2004.