The US Department of State has published the report on the investment climate for 2020 for Kosovo, where a high rating is given for the country's financial system. The report highlights the fact that Kosovo has an open market economy and the market sets interest rates.
The report states that the regulatory system conforms to EU directives and international standards. There are no restrictions beyond normal regulatory requirements related to capital sourcing, fit, and properness of the investors and that the CBK has taken all required measures to improve policies for the free flow of financial resources.
The report also highlights the sustainability of the banking sector, which remains well-capitalized and profitable. Difficult economic conditions, weak contract enforcement, and a risk-averse posture have limited banks’ lending activities, although marked improvement occurred in the past several years.
In February 2020, the rate of non-performing loans was 2.5 percent, the lowest rate in the last ten years. Interest rates have dropped significantly in recent years, from an average of about 12.7 percent in 2012 to an average of 6.3 percent in 2020. Slower lending is notable in the northern part of Kosovo due to a weak judiciary, informal business activities, and fewer qualified borrowers.
The CBK is responsible for fostering the development of competitive, sound, and transparent practices in the banking and financial sectors. CBK supervises and regulates Kosovo’s banking sector, insurance industry, pension funds, and micro-finance institutions. The CBK also performs other standard central bank tasks, including cash management, transfers, clearing, management of funds deposited by the Ministry of Finance and other public institutions, collection of financial data, and management of a credit register.
The report states that foreign banks and branches can establish operations in the country, subject to the same licensing requirements and regulations as local banks. The country has not lost any correspondent banking relationships in the past three years and no such relationship is currently at risk. There are no restrictions on foreigners opening bank accounts; they can do so upon submission of valid identification documentation.
The Central Bank of the Republic of Kosovo expresses its highest appreciation for the report related to the financial sector and expresses its sincere thanks to the US Department of State for the realistic assessment of the financial sector in Kosovo and the US Embassy in Kosovo for the continuous support it has given from the beginning, and continues to give to the CBK in the further development of this sector.
For more details, you can find the following link to the US Department of State report: https://www.state.gov/reports/2020-investment-climate-statements/kosovo/?fbclid=IwAR2YgPxCdvLszB-PNpWckolVJsU4TnoNTffL0lN6hLRrPwCjA2lGIb-gSDY