As I mentioned earlier, the emphasis in compensation practices on short-term performance over longer-term sustainable returns was a key vulnerability revealed during the crisis that helped motivate imprudent behavior. Currently, senior bankers are paid mainly in cash and deferred stock grants. This structure creates incentives to take actions to maximize a bank’s share price, rather than to minimize the risk of the bank’s failure. While compensation practices today feature a larger deferred component, greater emphasis on deferral in the form of long-term debt—which can also be recognized as TLAC—could better align senior managers’ interests with the long-term safety and soundness of the firm.16 As I see it, this approach could have two benefits. For one, it would reduce the incentives for risk-taking. For another, if TLAC debt holdings were at risk of conversion to equity in the event of failure, I believe senior bankers would be incentivized to cut dividends or raise equity capital earlier to reduce the risk of failure. Having a regime in place that creates strong incentives for management to steer aggressively away from bad outcomes would be better than one in which management has incentives to temporize in the face of rising risks. 6/8  BIS central bankers' speeches  Some banks have experimented with such compensation schemes, and I would encourage more to do so. But, this type of reform may also need a push from the regulatory side. Banks may be reluctant to adopt such pay structures on their own for competitive reasons.
On the other hand, the fiscal stimulus is estimated to have trended downward in the third and fourth quarters, albeit budget revenues and expenditure have continued to record high growth rates. The constant expansion of the aggregate demand has led to an increasingly higher utilisation of production capacities. The unemployment rate fell to 13.6% in the third quarter, down by 1.1 percentage points from the same quarter in the previous year. However, the gradual convergence of the economy toward its equilibrium is yet to be accompanied by upward inflationary pressures, sufficient enough for the return of inflation to target. Our accommodative monetary policy stance has reduced the costs of financing for the private sector, has boosted crediting in the domestic currency and has contributed to the improvement of the borrowers’ financial situation. In the last months, financial markets have performed relatively calm, amid low interest rates, controlled risk premia and the exchange rate set on a stabilisation trend. Banking system Year 2017 was positive in terms of the expansion and soundness of banking activity in Albania. A quick glance at the performance in the 10-month period corroborates this conclusion. Banking sector’s assets expanded further during the period, at 4%, in annual terms. The financial situation of the sector and activity capitalisation improved. Due to the considerable fall of loan provisioning, the financial result improved notably compared to the previous year. Also, the RoA and RoE indicators doubled at 1.6% and 16.3%, respectively, from 0.74% and 7.8%, in the previous year.