The positive movements in household savings contributed to the growth of the lending activity, so according to the latest available data as of September 2017, loans increased by 4.3% on an annual basis, with a solvency that is almost twice as high as the statutory levels and volume of liquidity that enables optimal day-to-day operation. It is also worth noting that in spite of the political environment, the deposit growth and the trust in banks have been achieved in the environment of historically lowest interest rates, both on the financial markets in the euro area and on the domestic interbank market. Also, allow me to mention that in the forthcoming medium-term period, the deposit market will urge banks to make even greater efforts to modernize and increase their offer. We live in times of global digitalization, great advancements in information technology and its daily use in the financial sector. Innovation and application of modern technologies globally put competitive pressure on the traditional forms of banking, and encourage banks to constantly adapt, be proactive and inventive, and by changing their business models to new phenomena and conditions, ensure their market success. Such processes will inevitably touch the bank operations in the Republic of Macedonia. In perspective, the use of modern technologies will not only affect the market performance of banks, but will probably change radically their relationship with depositors and other clients.
Free flows of capital across borders can make the domestic financial market deeper and wider, increase liquidity, and facilitate price discovery, thus improving efficiency of resource allocation. At the same time, diversification by investing overseas can help raise investment returns for households, which would in turn help promote private consumption and support sustainable growth. For emerging markets in particular, participation of foreign financial institutions can speed up the  1  Kaminsky, G.L., C.M. Reinhart and C.A. Vegh (2004), "When it rains, it pours: procyclical capital flows and macroeconomic policies", NBER Working Paper, 10708. BIS Review 141/2008  1  learning process and facilitate the adoption of best international practices by the financial sector. Therefore, while a more liberal regime for capital flows could at times bring about negative impacts, the relevant response should not be to keep the capital account closed forever, but to find ways of effectively managing the potential risks. International experiences have provided some broad suggestions on how such risks could be managed. Foremost is the importance of appropriate sequencing between liberalising the capital account and other domestic reforms. Development of financial institutions and markets, enhanced macroeconomic stability, and proper risk management by banks and enterprises would help to increase the resilience of the domestic entities in dealing with volatile capital flows. In addition, prudential regulation and supervisory framework need to be established, in order to prevent excessive risk-taking by domestic financial institutions.