Deposit to GDP ratio was 64.2% at end-year, higher than its level prior to deposits withdrawal. In addition, the profile of deposit time structure reflected a higher preference for saving, characterised by a shift to longer maturity-term deposits. Easing lending terms during 2010 H2, stimulating measures taken by the Bank of Albania, and decreasing uncertainty and risk premiums were followed by a gradual credit growth. Private sector loan portfolio expanded by 10% in 2010, principally influenced by foreign-currency credit growth. This performance reflects prudential bank policies on loan portfolio quality and economic agents’ moderate demand for loan. In general, lending continues to suffer from lack of demand and realistic, qualitative and valuable business plans for crediting. Restoration of confidence in the financial system, macroeconomic stabilisation, and regulatory and supervisory measures taken by the Bank of Albania led to stabilisation and improvement of banking system capitalisation, liquidity and profitability indicators. 2. Inflation and monetary policy  Annual consumer price inflation was on average 3.6% in 2010, remaining within the Bank of Albania’s targeted band. Inflationary pressures were more concentrated in 2010 H1, mostly triggered by a rise in some administered prices. Average annual inflation in 2010 H1 was 3.9%. In the following two quarters, relative stabilisation of the exchange rate and low inflationary pressures from the domestic demand contributed to the average inflation rate convergence around the Bank of Albania’s target. Negative output gap generated contained inflationary pressures throughout 2010, thus balancing the national currency depreciation effect and the international market price rise.
New regulatory acts and key amendments to actual acts on banking supervision approved during 2010 are:   Regulation “On management of risk from open foreign exchange positions”;    Regulation “On risk management in the activity of non-bank institutions”;    Guideline “On conservatorship and liquidation of banks”. *  *  *  Besides the main aspects of the Bank of Albania’s work, such as monetary policy and banking supervision and regulation, the Bank of Albania’s activity was also focused on fulfilment of its other legal obligations and institutional commitments. Sparing the details, I would like to emphasize that the Bank of Albania has done a great job in 2010 for:   Developing and sophisticating the payment system;    Supporting the integration processes of the country, in accordance with our scope of activity;    Enhancing our communication with the public, as an essential instrument to foster transparency and central bank independence;    Further developing the monetary statistics and those of the external sector of the economy;    Strengthening research capacity, in support of analysis and decision-making. All these activities serve the financial system development and support the free market economy in Albania.