Considering the need for market development and the identification of the role of the Bank of Albania in these markets as the Lender of Last Resort as indispensable, we have prepared and will soon enough implement a complete package of regulations, whose purpose is to establish incentives and minimize risks in the Albanian financial market. Concretely, these changes consist in:  2  BIS Review 122/2007  The law on repurchase agreements. There is compiled the draft-law, which enables the risk-free conduct of repurchase agreements among commercial banks. It will guarantee the prevention of credit risk, which is cited by commercial banks as one of the primary causes for the existence of limits in the lending relations among banks. This law will also prevent the legal risk the banks are faced with when using repurchase contracts. Drafting of the regulatory framework and putting into application the custodian principle of delivery versus payment. In order to minimize the payment settlement risk and facilitate the intermediation in all types of transactions involving securities, such as collateralized loans, repurchase agreements, and outright purchase and sale of government papers, it is being worked on to put into practice the principle of delivery versus payment. Reducing the frequency of government treasury bill auctions. In collaboration with the Ministry of Finance, we have agreed on less frequent and increased size auction schedule of the government treasury bills.
It is also true that the movements of the exchange rate observed recently have surprised us to a certain extent. These surprises, however, should be taken as economic shocks that no economic relationship could have predicted. We central bankers are not very interested in short-term volatilities, but we should not miss breaks in the business cycle. For this task we need a relationship that has an economic grounding in the profitmaximising behaviour of the financial markets. And this is what the uncovered interest rate parity certainly has, and what the statistical models lack. Ladies and Gentlemen, allow me to wish to all of us fewer exchange rate surprises and the best possible forecasts! 2  BIS Review 17/2007