BANK OF ALBANIA

PRESS RELEASE
Bank of Albania Annual Conference: Conclusions

Publication date: 11.10.2019

 

The Bank of Albania co-organised with the London School of Economics and Political Science (LSE) the annual conference: “A Brave New World? The Future of Banking in Emerging Europe: Rethinking Size, Structure, Ownership, Policies and Incentives”, on 11 October 2019.

The Conference addressed the outlook of banking sector in Europe, primarily in South-Eastern Europe, and particularly in Albania, regarding the size, structure, ownership, and global and regional incentives. Discussions focused on the expected developments in the entire banking sector, conditioned by a global reality with heightened uncertainties in both economic and political aspects, and an era of changes and technology innovations with multidimensional effects that either directly or indirectly affect all economic agents.

A closed-doors roundtable on:” Global and EU-wide trends affecting the landscape for Southern-Eastern Europe”, preceded the Conference. Chaired by the Governor of the Bank of Albania, Mr Gent Sejko, the round table focused on the new global and European trends, and their impact on the economic development in Albania, the region, and globally. In addition, the discussion addressed the importance of both macroeconomic and financial developments globally and mainly in Europe for Albania, taking into account the close financial and trade relations with these countries. One of the main conclusions of this roundtable is that all national institutions need to commit themselves to continuing and intensifying structural reforms for EU convergence, and cooperate and coordinate their efforts with international, and mainly EU institutions, as a key anchor for Albania.

The first panel of the conference addressed the new trends and phenomena in the global economy. The discussion, presentation and analysis of these phenomena are of particular importance to all institutions in order to build up bridges for coordination and collaboration not only domestic actors, but also with important international institutions. Speakers emphasised the importance of structural reforms and their acceleration, in order to have a stable economy in long term.

Banking sector plays a crucial role in economic development. Some of the challenges to this sector are obviously the technological developments and innovations, increased uncertainties surrounding the economies and political aspects, and climate changes.

The experience of South-Eastern Europe (SEE) during these 30 years has shown that central banks have helped in accelerating the convergence process of these countries. Banks have helped enterprises to adopt new technologies and grow productivity. Nevertheless, to have a stable and long-term growth in the future, financial sector, mainly in SEE countries, should adapt, re-balance and contribute more to the development of capital markets, and explore new financing markets. Such changes need also important legal and fiscal improvements and changes in these countries.

On the other hand, global trends of macroeconomic developments and technological developments are expected to affect the current model of banks business model. The changes and new rules of banking supervision pose banks to: revise and adapt their processes and rules; reshape their business model, adapt to the changes and innovations, which will provide broader access to finance in the future.

New FinTech technologies are another challenge to the financial system. Digitalisation will affect all banking system aspects, not only the operational and payment ones, but also the improvement of risk management and the use of artificial intelligence to assess the risk. FinTech also will affect the way how banks should interact and cooperate not only with the national supervision authorities, but also with the European supervisory authorities (EBA, ERSA, etc.).

Nevertheless, technological changes will not diminish the importance of the banking system; it has to adapt and co-live with them. The technology will help increase financial inclusion and access to financing and will offer a more effective and personalised service to all. But, in this period of revolutionary changes, banks should enhance their communication with the public and transparency, as well as educate the public on new products and the benefits and risks related to them.

Financial system stability is important and remains a common challenge and interest for all domestic and foreign banks. For, better collaboration and coordination is needed among supervisory and regulatory institutions in and outside the EU, in terms of macro-prudential, regulatory and supervisory policies. Vienna Initiative is a good example of collaboration, but much more is needed to enhance and deepen international cooperation, through the establishment of collaboration mechanisms among authorities.

The Closing Panel with the Governors’ Roundtable brought together in a discussion panel: governors, former governors and deputy governors of central banks of Albania, Bosnia & Herzegovina, Ukraine, Estonia, Argentina as well as LSE representatives. This panel summarised the ultimate economic development trends in these countries, and the challenges central banks face in terms of a slower global economy, increased economic and political uncertainties, and in front of technological innovations and climate changes.

In his input, Governor Sejko emphasised that central banks face a set of new challenges arising from new economic and technological developments. Therefore, it is necessary for central banks to attentively analyse these phenomena, by taking into account both the economic and financial developments of the country, human capital development and its financial inclusion, etc.

At the conclusion of the panel session, all participants concurred that both technological changes and innovation will require important structural and regulatory changes, which need better coordination and collaboration among all the interested parties.