For example, understanding supply and demand factors affecting the MBS market is essential in helping to ensure that operations can be executed smoothly. In addition, MBS have an embedded prepayment option, which affects the risk and prepayment characteristics of these securities, and consequently the way in which purchases of these securities influence policy objectives and the Federal Reserve’s balance sheet over time. The scope of the Desk’s market expertise has had to expand in ways beyond supporting new modes of operation. As the financial crisis revealed the importance of maintaining a wide range of financial market knowledge, Desk staff covered a broader set of financial markets and instruments compared to the pre-crisis period. We also more explicitly focused on linkages between markets and underlying, longer-term trends that could present financial stability risks in the future. With the expansion of monetary policy into less conventional territory, our analysis of monetary policy expectations had to evolve as well, as evidenced by an increasingly comprehensive survey of primary dealer economists each FOMC cycle4. Lastly, our own internal analytical capabilities have also deepened, for instance with the creation of a portfolio analytics unit to better assess the risks and outlook associated with the Federal Reserve’s expanded asset holdings.5 I anticipate that as the economic and policy environment changes, the Desk’s interactions with the market will continue to evolve, both in terms of its operational capabilities and the focus of its market monitoring and analytical responsibilities needed to support Federal Reserve operations and the information needs of policymakers.
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.