When banks have the right incentives to improve their management of risk and they are well capitalize, we believe that the banking sector becomes more resilient, less sensitive to the business cycle, and better able to serve as a source for credit and sustainable growth of the economy. 2  BIS Review 29/2004  This workshop explores the role of transparency in promoting the resilience and stability that Basel II has as its overarching goal. The Basel Committee certainly agrees that markets can serve as powerful allies of official supervision. We recognise that, in some cases, market discipline can exercise a more binding constraint on banks’ activities than regulations do. But I would emphasise that transparency does only part of the job. For transparency to promote stability, it must be combined with other policy approaches to achieve a goal that is as far-reaching and as significant as greater financial stability. Certainly, the Committee would agree that, when banks disclose sufficient information about their activities and controls, marketplace participants can create strong incentives for prudent behaviour. Markets can reward banks that manage their risks properly and penalise those that hold unrealistically low amounts of capital for their risk. So there is a great deal of merit in a markets-based approach. But we must remember that markets can behave inefficiently. They may overreact to minor events yet ignore significant indicators of risk, or they may be too short-sighted.
The real sector is showing signs of constant recovery, corroborated by some positive developments in the external economy. I would like to underline that a clearer prospect of the political and economic situation in Greece will have a positive impact over the upcoming period. The Bank of Albania has been continuously monitoring the developments in our Southern neighbour, aware of the various risks that could spill over in the Albanian economy. But, thanks to the precise and duly interventions, especially in the banking sector, these risks never materialised. BIS central bankers’ speeches  1  The constant easing of the monetary policy seems to be reflected especially in investment indicators, with the domestic and foreign ones showing significant improvement over the first half of the year. On our side, we are happy that these investments were not only due to public sector interventions. There was also a substantial component by the private sector. This makes us believe that well-studied projects by the investors, coupled with an increasingly sound and pro-investment business climate, will serve as main drivers for the economy towards not only higher but also more sustainable growth in the near future. In accordance with the best contemporary practices, the Bank of Albania has endeavoured to enhance the transparency in its communication with the public, not only about the actual decisions but also about our forecasts. The Bank of Albania has constantly conveyed to the economic agents the idea that the monetary policy will remain accommodative and will sustain the revitalisation of the economy.