Download ALBANIAN FINANCIAL SUPERVISORY AUTHORITY

ALBANIAN FINANCIAL SUPERVISORY AUTHORITY
Opening speech of Ms. Enkeleda Shehi, chairperson
Your Excellency, Prime Minister,
Your Excellency, Mr. Sequi,
Dear colleagues and participants,
Welcome!
I would like to thank you for your participation in this event, which is organized by the Albanian
Financial Supervisory Authority, with support from the United States Agency for International
Development (USAID) through its Program for the Albanian Financial Sector Development
(FSVC).
It is both a pleasure and an honor for me to open the Conference “Independence of the Financial
Sector Regulators: Reemphasized, from the perspective of the European Union and the lessons
learnt from the recent global financial crisis. It is quite a fortunate coincidence that we are
talking about the independence of financial regulators—including the independence of the
Albanian Financial Supervisory Authority—at the same time as the celebrations of the 100th
Anniversary of the Proclamation of the Albania’s Independence.
The Proclamation of Albania’s independence opened up its path towards the independent
development of the country to the currently new historical stage of European Union
integration—as you might know, this month the European Commission recommended the
European Parliament to grant Albania the status of an EU candidate country. During November
we are celebrating, and, at the same time, contemplating, a century of independence, we believe
that it is time we worked to modernize our economy and public institutions so that the future will
bring even greater progress for our nation.
Strong, independent regulators essential for market-based democracies
Regardless the historical context or moment, the essence is the same: Independence is a must for
achieving and consolidating development. This is just as true about institutional independence,
1 including the independence of financial sector regulators. Today, the independence of
institutions is a critical element of democracies. Independent regulators are common place
around the world. The discussion is not whether there is a need for independent institutions. The
need for establishing independent institutions has already been turned into an axiom. The
discussion of institutional independence has now shifted to what degree of independence to give
institutions and how to increase its effectiveness.
Existing literature agrees on two significant elements in determining independence of financial
regulators: First, independence from political pressure, and second, independence from the
industry under supervision and regulation.
In the context of academic and political decision-making, independence has been a standard
feature of financial regulation, as this has an impact on maintaining the stability of the financial
system. Independence, however, is not a given and sustainable quality. For them to be
independent, regulators themselves need to make persistent efforts, since their independence is
under constant pressure from politicians and stakeholders.
The latest financial crisis increased political pressure on financial regulators, and their attempts
for increasing their role in the financial regulation. As scholars have underlined, greater political
involvement might endanger financial stability. To borrow a quote from Quintyn and Taylor, two
distinguished scholars of financial regulators’ independence, I would say that “political
interference in the financial regulation makes a bad situation worse.” From this perspective it
continues to be necessary to strengthen the independence of the regulator in all respects, but
especially its institutional and financial dimensions. We cannot afford to wait for a financial
crisis to hit us to implement the required reforms. We should learn the lessons from other
people’s mistakes.
Market development hinges on clear, stable rules
In addition, independence from the supervised and regulated industry is another contributor to
market development and, in turn, to the development of the economy. An independent regulator
sets clear and stable rules for market players, and ensures consistent application of those rules
2 across the sector and over time. Thus the industry operates in a more transparent and stable
environment
This element, which is also reinforced by the fulfilment of another mission of a regulator,
namely consumer protection, contributes to increased public interest in “consuming” financial
products that, in turn, can help raise their standard of living. The bottom line analysis is that
independent regulators promote financial market development. A more developed and stable
financial market is naturally in the interest of the financial industry and the overall economy, and
there are no doubts that it is also in the interest of the industry itself to be regulated and
supervised by an independent authority.
AFSA policies encourage insurance, securities, pension market growth
Your Excellency Prime Minister, we would like to use your presence at this Conference to make
a brief presentation that will inform you about the challenges facing the Albanian Financial
Supervisory Authority.
AFSA is the Authority supervising and regulating the Insurance Market (with 12 life, non-life
and reinsurance companies operating for more than 10 years) with assets of 138 million Euros.
We think that the market can grow by a factor of two to three with encouraging policies in a
relatively short period of time (introducing insurance product in real estate, business, agriculture
or new industries as well as expanding life assurance products), which would help it come closer
to the levels of this market in neighbouring countries. That would promote financial sector
development, increase access to financing the economy and on the other hand would generate
new jobs for Albanians, thus increasing employment. The draft-law on insurance and reinsurance
activity, which was submitted recently to the Ministry of Finance, was written having this target
in mind and in the same time in compliance with the EU standards. We, at the Albanian FSA, are
also working for compulsory insurance law amendments taking into consideration EU directives
and also aiming at solving the problems we are facing up to now. Mr. Prime Minister, we are
asking your support to proceed as soon as possible with the approval of these two draft-laws.
The same is true for private voluntary pension funds. Albania is at an early stage, with only three
pension fund management companies that manage assets of about one and a half million Euros.
3 Based on fiscal incentives, and possibly through emphasizing such a policy, here, too, there is
great potential for growth in the future to help raise the living standard, increase the long-term
savings of the population, completing the mandatory pension scheme, which in turn will have a
smoothing impact for the state/government in terms of managing such a scheme.
The last market we supervise is securities and investment funds, which experienced relatively
important developments during year 2012. These funds, that manage about 120 million Euros,
are expected to become key players in financial sector development, in financing the economy
and in private sector investment.
To cope with market growth, AFSA needs more control over resources
In a few words, the Albanian FSA is prepared to cope with a much greater and more difficult
workload in the future. But to get the job done right, we kindly ask for the understanding of the
Albanian Government and its Prime Minister to support a more independent AFSA, especially in
enhancing its independence in determining our internal organizational structure, salaries and
number of staff. We believe that, with such a policy, we will be able to hire and retain younger
staff that has been trained abroad. High quality, professional and integer staff is essential if we
are to achieve our policy goals, especially industry growth and consumer protection. An
additional factor in favour of enhancing independence to AFSA is that we are able to do the job
by using our own financial means, with no need to ask for support out of the State Budget. The
draft amendments to AFSA Law that have been prepared reflect these view and they were
consulted with international experts. I take this opportunity to thank the FSVC for bringing
together a distinguished group of consultants from USA, France and Poland. Their contribution
was valuable to us.
Distinguished colleagues
I am confident that this Conference will address the current issues of the day. The public, market
players and the authorities will learn more about the many advantages of having strong and
independent financial regulators. For the countries in the region and, especially, for Albania,
strengthening institutional independence can contribute to the process of integration into the
European Union and bolster public support for democratic values. The presence of the Prime
4 Minister today reinforces our belief that the political will is there to support a stronger and more
independent Albanian Financial Supervisory Authority.
Thank you for your attention,
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