A clear-cut arrangement for the management of crises can be difficult to construct in advance. It is hard to tell at present how these problems should be resolved. In principle there are two conceivable approaches. One involves continued cooperation on agreements, joint principles and regulatory frameworks. The other is to have more supranational management. It is probably a combination of the two that will be needed. The important thing today, however, is that a debate on these complex issues gets under way before we find ourselves in a situation where it is necessary instead to deal with them in an emergency. More advanced risk management Another factor that will probably affect future work on the supervision and oversight of stability is the banks’ increased possibilities of managing risks. The assessment of risks is one of banking’s traditional functions. Things have changed markedly in this respect since the mid 1990s. Technical progress and new financial theories have led to a refinement of the methods for and possibilities of measuring credit risks. This has been accompanied by facilities for trading risks with additional financial instruments in increasingly international markets. All this has enhanced the ability of the banks to manage risks. Banks in general - not just the largest international groups - have invested in new systems for risk management. The trend, which began earlier, has been accelerated by the new capital adequacy rules, Basel II, that have just been produced.
In line with the cyclical situation, this policy has provided its stimulus through the key interest rate cut and ongoing liquidity injection into the banking system. We have also revised the banking system regulatory basis from the viewpoint of easing it, in order to stimulate lending by the banking system. I avail myself of the opportunity to reiterate that the banking system remains profitable, liquid and well-capitalised. Safeguarding the stability of this system will always be on our focus. BIS central bankers’ speeches  1  Third, reducing uncertainties and risk premiums in the economy is an important priority. As I have already stated, these uncertainties stem, to a great extent, from the foreign market, but a part of them stems from the Albanian economy. Without intending to make a list, I will mention just a few: •  Reducing informality should be a primary objective. Besides outflows in public finances, informality brings hidden costs in terms of diminishing competition, inefficiency in terms of lack of balance sheet transparency, and artificially increased financing costs to businesses. •  Fostering the financial system infrastructure protection is another aspect deserving attention. The Bank of Albania signed and has already made effective a cooperation agreement with the People’s Bank of China, which also provides for the possibility to obtain liquidity in case of need. An important step in this regard is the agreement between the Deposit Insurance Agency and the European Bank for Reconstruction and Development to increase the deposit insurance coverage.