Chart 15 is a point-in21  All speeches are available online at www.bankofengland.co.uk/news/speeches  21  Chart 13: The FPC’s housing tools prevent an  Chart 14: FPC housing tools have positive net  increase in highly indebted households  benefits Per cent of GDP  Benefits Costs Net Impact  3 2 1 0 -1  Central  Upside  Boom  Source: Bank calculations. For more information please see the Bank’s Financial Stability Report, December 2019. It is often the case that more than one policy tool could be used to reduce GDP-at-risk, but these tools tend to be blunt. More targeted policies will usually have less impact on the FPC’s secondary objective, and so will yield better overall outcomes. The grey triangles in Chart 15 estimate GDP-at-risk (proxied by the 5th percentile of the forecast distribution of GDP) in 3 years’ time, conditional on risks at time t on the x-axis, versus on the y-axis the Bank of England’s 1-year ahead median GDP forecast at time t. It estimates that if in 2004 the FPC had their housing tools in place, GDP-at-risk (x-axis, proxied by the level of GDP expected in 2007, at the 5th percentile of the forecast distribution of GDP) could have shrunk by more than one third, from -3.3% of GDP to -2.1% of GDP. The cost of this (y-axis) would have been around 0.1% of GDP per year.
I do strongly believe that our efforts will persist in the future as well, enabling a smooth shift of the operational target and optimal functioning of their new form. Interbank market development Dear colleagues, Bank of Albania’s role in promoting the interbank market is indisputable. However, we are fully aware that the development of this market mostly reflects the results of the banking system’s own development and efforts. Therefore, the Bank of Albania requires your utmost attention in this regard. More precisely, in our discussion today we would like to have your opinion on the three steps we consider will boost the development of the interbank market. First, setting the prime rates in the functioning of commercial banks. These rates can and should serve as a guide to setting prices on banking products, both on the assets and liabilities’ side. Second, the functioning of the collateralized market through repo or reverse repo contracts. Although in its classical concept the interbank market is an uncollateralized market, its enhancement with the abovementioned instruments would open the way to its thorough development, ensuring a more efficient distribution of liquidity among the market operators. Third, banks can and should be active in quoting the liquidity in the Albanian lek, keeping the same stance as in the foreign exchange market. The constant quotation will encourage a more active liquidity management and it will enable its continuous price setting.