In most jurisdictions, but crucially not in the euro area, unconventional monetary policies have led central banks to purchase significant amounts of Government debt: those purchases amount to 51% of the total debt issued since 2009 in the UK, 21% in the US and 7.6% in the euro area – where they were fully sterilized. Although this was not the primary purpose, this policy stance has contributed to giving markets an insurance, or even an assurance, against a potential dry-up in liquidity. In all countries where significant amounts of debt have been purchased by monetary authorities, long-term interest rates have been kept at very low levels, irrespective of their fiscal situation. By contrast, purchases of sovereign debt by the Eurosystem have remained extremely limited and will stay so. Our objectives are very circumscribed: avoid disruptions in the monetary policy transmission mechanism. Any lasting liquidity backstop has to come from the governments. This is why we have been asking for more flexibility in the EFSF and very much welcome decisions taken in this regard on July 21st. Whether amounts are big enough is a matter of opinion. It would be unrealistic to expect an increase in the EFSF itself but I am personally open to any scheme that would allow existing commitments to be leveraged to provide greater intervention capacity. At the moment, the kind of insurance that most monetary authorities provide may look cheap because inflation is projected to stay low in the foreseeable future. But this equilibrium could be unstable in a different inflation environment.
The Bank of Albania will support this process by cooperating with the banking industry and improving the regulatory and supervisory framework. For the supervisory authorities of the financial system, the recommendations relate to strengthening the preventive and management framework of risks and, in this regard, improvement of the legal, operational and inter-institutional cooperation infrastructure is recommended. Concluding, I would like to reiterate our message: the prospects for Albania’s development remain positive. The economic and financial stability, geographical position and natural resources, and integration with the European Union make us optimistic about Albania’s future development. I invite you all to share in this vision and work together to make it a reality. I assure you that the Bank of Albania, as the supervisory authority, will undertake all the necessary actions, under its scope of activity, to support the industry to successfully overcome these challenges and ensure that the sector remains well capitalised and liquid. Thank you! BIS central bankers’ speeches  3