After the licensing of Popular Bank, with Albanian capital, the number of banks increased from 15 to 16, and a preliminary license is granted to Union Bank, which is expected to raise the number of banks to 17 over 2005. The system assets have further increased by 14 percent while there was an increase of banking products and an expansion of their network. During this year there will be sold the public shares of both the Italian Albanian Bank and United Bank of Albania, which will lead to an increase of effectiveness and banking competition, paving the way to the processes of selling, merging and acquisitions towards a new consolidation of the banking system. The lending activity increased by 38 percent where one can distinguish inter alia the significant growth of medium-term and long-term loans compared to short-term loans. The map of coverage of the country with the banking system has further expanded, including new areas ever covered before. At the end of 2004, the total number of branches reached 88, or 11 branches more that the end of the previous year, while the number of agencies recorded for the first time a full three-digit number, 100 and the number of the employed people increased by 26 percent. BIS Review 44/2005  1  The high increase of the number of branches relative to agencies shows that banks are not interested only in providing the service of collecting deposits but also in providing other products like crediting to the economy.
But in a world in which capital flows freely, local attempts to control the pace of credit creation, particularly within the financial system, may not work. All of that will need to be thought through. But first we need to concentrate on the immediate challenges. Summary In a speech four months ago, I stressed that “we must try to avoid a vicious circle in which tighter liquidity conditions, lower asset values, impaired capital resources, reduced credit supply, and slower aggregate demand feed back on each other”. I identified monetary policy, liquidity policy, and regulatory capital policy as being amongst the instruments the authorities would need to use. That remains the case, as the stress in the global financial system has  4  BIS Review 38/2008  continued and, in the US at least, evidence of a feedback loop is apparent. Each of those instruments is constrained in some degree. That underlines the need for close co-operation between the authorities and the industry, and internationally. BIS Review 38/2008  5