But is it not time to ask the question of whether the implicit government guarantee afforded to the banking systems of the major industrialised countries is itself not part of the problem. One of the factors contributing to the scale of short-term debt flows to emerging markets is the moral hazard implied by the financing of banks in the developed world. It is certainly crucial that international rescue packages do not lead to moral hazard in the provision of finance to emerging markets. But an important lesson for the G7 is that moral hazard starts at home. In the resolution of crises less progress has been made. The IMF can, and has, provided financial assistance without which the cost of recent crises to the affected countries would have been even greater. But the stumbling block has been how “to involve the private sector”. Although the statement by G7 finance ministers to the Cologne Summit in June set out both “principles” and “tools” for involving the private sector in crisis resolution, much remains obscure. Unilateral debt moratoria can be damaging in terms of future access to capital flows. But there will be circumstances in which a debtor country and its creditors could benefit from a joint resolution of temporary payments difficulties, and procedures are needed to prevent some creditors from free-riding on others. The following four elements in crisis resolution merit some consideration. They have no particular status, but are issues that need to be faced.
In line with the cyclical situation, this policy has provided its stimulus through the key interest rate cut and ongoing liquidity injection into the banking system. We have also revised the banking system regulatory basis from the viewpoint of easing it, in order to stimulate lending by the banking system. I avail myself of the opportunity to reiterate that the banking system remains profitable, liquid and well-capitalised. Safeguarding the stability of this system will always be on our focus. BIS central bankers’ speeches  1  Third, reducing uncertainties and risk premiums in the economy is an important priority. As I have already stated, these uncertainties stem, to a great extent, from the foreign market, but a part of them stems from the Albanian economy. Without intending to make a list, I will mention just a few: •  Reducing informality should be a primary objective. Besides outflows in public finances, informality brings hidden costs in terms of diminishing competition, inefficiency in terms of lack of balance sheet transparency, and artificially increased financing costs to businesses. •  Fostering the financial system infrastructure protection is another aspect deserving attention. The Bank of Albania signed and has already made effective a cooperation agreement with the People’s Bank of China, which also provides for the possibility to obtain liquidity in case of need. An important step in this regard is the agreement between the Deposit Insurance Agency and the European Bank for Reconstruction and Development to increase the deposit insurance coverage.