Financial markets continue to highlight downward liquidity premiums and inflation. The interbank interest rates have further declined, remaining close to the key interest rate and displaying low volatility. A more moderate government demand for funding and the shortterm interest rate cut in the money market have been reflected in an overall decline in the yields on primary market government securities. Our assessments on economic outlook suggest a moderate economic growth for the remainder of the year and for the next year. Boosted uncertainties surrounding the global economy make their impact on current and expected developments of the Albanian economy. In particular, the situation of our trading partners is expected to be reflected in a sluggish foreign demand for Albanian goods and services. Also, the need for maintaining budget deficit and public debt parameters is expected to materialize in the public sector’s lower contribution to aggregate demand over the period ahead. Under these conditions, the performance of economic activity at home will be determined substantially by the extent and speed of recovery of the private sector demand – consumption and private investments. Despite the positive growth, aggregate demand is expected to remain below the potential of the Albanian economy, determining the incomplete capacity utilization in the economy and generating demand-driven low inflationary pressures. Considering the materialization of these expectations and projections for further weakening of inflationary pressures from global conjuncture, annual inflation is expected to be within the Bank of Albania’s target in the medium run.
To protect against risks that banks think are low but are in fact not, a global definition of a simple leverage ratio has been agreed. In the UK, the Bank of England has just recommended powers to set a simple leverage ratio for domestically-regulated banks, building societies and investment firms. This will enhance the resilience of banks against risks that are hard to model.4 And it will ensure off-balance sheet exposures are properly capitalised. 3  Table 2 shows that the risk weighting of trading book assets has more than doubled. Despite accounting for only 5% of overall risk weighted assets, trading assets contributed more than one third of the overall increase in RWAs resulting from new regulatory requirements. Banks have responded by shrinking trading books. Chart 2 shows that across all advanced economy SIFIs, the share of such assets on bank balance sheets has almost halved. 4  Chart 2 shows that, for more than a decade before the crisis, average risk weights declined and, as they did so, banks increased leverage. This trend was central to the erosion of confidence in risk weightings. Since the crisis, average risk  BIS central bankers’ speeches  3  Retention and capital requirements for securitisations now have more closely aligned incentives between originators and investors. New requirements for money market funds have closed the gap between retail investors’ perceptions and their exposures. International standards are agreed to capture properly and limit off-balance sheet exposures.