It will tend to result in financial markets being hot-headed in the summer and frozen-eared in the winter. Table 1 demonstrates this pattern. It compares haircuts on a range of financial instruments used to back borrowing – so-called securities financing. They are shown on two dates, before (June 2007) and after (June 2009) the financial crisis. Haircuts rose by up to 90 percentage points in the space of these two years, as the scorching pre-crisis summer gave way to a frozen crisis winter. In other words, haircuts exhibited a rather dramatic procyclicality over the course of the crisis. Table 1: Typical haircut on term securities financing transactions (per cent) June 20071  June 20091  Medium-term G7 government bonds  0  1  Medium-term US agencies  1  2  AAA-rated prime MBS  4  10  Asset-backed securities  10  25  AAA-rated structured products  10  100  AAA- and AA-rated investment grade bonds  1  8  High-yield bonds  8  15  G7 countries equity  10  15  Source: Committee on the Global Financial System (2010). 1  Prime counterparty. BIS central bankers’ speeches  1  This haircut cycle played an important causal role in the crisis. Secured financing became an increasingly important source of credit in both bank and non-bank markets over the past decade. In the US, the repo market financed roughly half of the growth in investment banks’ balance sheets between 2002 and 2007.
In the medium term, the Bank of Albania will focus its efforts on a number of initiatives, notably on further legal developments and infrastructure improvements. An important step in the medium term is the drafting of the bill “On the payment account". The bill will transpose the European Union Directive “On the Payments Account” and promote transparency by creating a public register to present all commissions applied by institutions, which can be easily compared. At the same time, during this period, the Bank of Albania will engage in a number of infrastructure developments that support financial inclusion, reduce the costs of using these instruments and is estimated to have an impact on the remittance market, mainly from the point of view of remittance receivers and their use. Here we can mention the creation of a national platform for processing payments in real time (instant payment and processing of card payments). The platform creates conditions for the development of innovative and low-cost services and also aims at market segments that create ample volumes by targeting state institution payments as well as daily payments that Albanian citizens make. Last but not least, I would like to thank the Government of Albania for the importance it places on this matter and its continuous support. In particular, I would like to thank the ministries such as the Ministry of Diaspora and the Ministry of Finance and Economy for their support and fruitful cooperation.