Given the subdued inflationary pressures, we have lowered the policy rate to the record level of 3.5%. The path of the credit interest rate has followed this trend, although at a slower pace. Given the weakness of the credit channel in the monetary transmission mechanism, we have tried to strengthen our impact by adopting some countercyclical measures to promote credit growth. In this regard, we have temporarily increased capital requirements for placements of banks abroad and have reduced those for credit in the domestic economy. In addition, we are promoting credit restructuring at an early phase by reducing provisioning requirements if that is the case. Several legal and regulatory measures have been taken in cooperation with other authorities and the banking industry, to improve collateral execution process and facilitate loan write-offs. The results of such measures have been mixed so far, but in the coming months we expect their impact to be noticeable. This is also linked with the commitment of the Government to pay its arrears to the private sector in the next year. Nonetheless, it is important that the banking industry continues to support sound business propositions of borrowers. Banking activity may be driven by profits but is based on relationship with its customers. Now is the time when such relationship is being tested, and good bank management must look beyond the current challenges to keep and strengthen such relationship.
While the long-term objective should be to create conditions for achieving a more balanced and diverse financial system, the shorter times objectives should focus one having a stable financial system that provides adequate financial services to its customers, both savers and borrowers, thus maintaining its fair share of contribution to the economic developments of a particular country. The banking sector in Albania has felt the impact of the international financial crisis, as the weaker credit standards before the crisis and the weaker economic growth afterwards, have been translated into lower asset quality and difficulties to consistently maintain positive financial results. In front of higher credit risk, credit terms have been tightened and credit growth has been sluggish. In September 2013, credit growth turned negative driven by credit in foreign currency and to businesses. However, the banking sector remains well capitalized and liquid. Banks have been able to raise new capital and financial support from their mother banks. Especially, Greek banks operating in Albania have enjoyed strong support from their mother banks so far, and we expect this to continue in the future too, if needed. Overall, in September 2013 the risk  BIS central bankers’ speeches  1  weighted capital of the banking sector stood at 17.8%, while the ratio of liquid assets to short term liabilities was 36.5%. The sector has shown strong preference for investments in Albanian government debt securities and placements abroad. Bank of Albania has been taking a number of measures to support credit growth and address the loan quality problems.