Thank you again for coming back to the second session. In this session, we will continue to discuss the negative euro area interest rates and financial stability in our respective countries.
The composition of this panel is very interesting, because now we have the representatives of Western Balkan countries. This panel composition will give us the opportunity to see from an insider’s perspective the correlation between the negative interest rates environment and financial stability in the Western Balkans.
Eased monetary conditions are very classical ingredients for financial crises. This relation acquires a new and interesting dimension since we are now talking not just low interest rates, but negative interest rates. The subject is more often present in the debates regarding the correlation between low interest rates and the risk-taking channel, which is the so-called monetary policy risk-taking channel. It is increasingly becoming an accepted postulate of the economic doctrine that, yes, there is a very strong correlation between very low and for too long interest rates and this risk-taking channel.
Because interest rates are not just low, but negative, this sensitivity is supposed to be stronger. In addition, there are other conditions, which might be of a national or global development nature, based on which this correlation may take a new and bespoke pattern. For more details on this correlation, Mr. Klodion Shehu, the Head of the Financial Stability at the Bank of Albania, will share with us his perspective on the implication of low interest rates for financial stability in Albania.