With an estimate of the equilibrium values of debt ratios or asset prices, for example, we can study the gap between their current value and their equilibrium value.4 If the gap is wide, the danger of a significant consolidation is present. However, the results must be interpreted carefully. Equilibrium values are inherently difficult to determine, and it is not obvious that there is a stable and significant relationship between gaps and future economic activity. In addition, decisive factors in the judgement of the financial situation, like agents’ confidence in the financial system, are also difficult to incorporate in the analysis. A related approach is to analyse the potential impact of adverse macroeconomic shocks on financial stability. Stresstests are commonly used for this purpose. Such tests investigate banks’ ability to withstand different types of shocks under various economic conditions and with different monetary policy responses. When conducting stresstests, macroeconomic models have proven to be valuable. However, considerable work remains to be done in order to capture the behaviour of economic agents in the case of extreme macroeconomic events. 2  Hoggarth, Glenn, Ricardo Reis and Victoria Saporta (2001). “Cost of banking system instability: some empirical evidence” Bank of England Financial Stability Review, Issue 10, Article 5, June  3  See for example Borio, Claudio (2003). “Towards a macroprudential framework for financial supervision and regulation?” BIS Working Paper No. 128  4  See for example Borio, Claudio and Philip Lowe (2004). “Whither monetary and financial stability? The implications of evolving policy regimes” BIS Working Paper no.
Ardian Fullani: Agreement between the Bank of Albania and the Competition Authority Speech by Mr Ardian Fullani, Governor of the Bank of Albania, at the signing of the Memorandum of Understanding, Tirana, 17 July 2007. *  *  *  Dear participants, I am pleased to have concluded this co-operation agreement between the Bank of Albania and the Competition Authority. In observance of the legal responsibilities of the institutions we represent, this agreement concludes the formal basis for cooperative efforts, in terms of achieving the objective of enhancing the competition conditions, in which the banking and financial activity is being conducted. Fair competition promotes the efficiency in the banking business and refines the composition and the functioning of the banking market, by providing significant services to clients and the public at large, being users of banking and financial services. It has been for some years now that the Albanian economy and the financial system are in an intensive process of integration into the regional economies and markets. This process requires the improvement of the legal and regulative framework for developing the business and the enhancement of the human and institutional capacities to cope with the challenges deriving from the economic openness and the enhancement of competition.