16/06/2017

Deputy Governor of the Central Bank of the Republic of Kosovo, Mr. Fehmi Mehmeti is attending the Summit of Governors of Central Banks, Finance Ministers and Directors of Tax Administrations of the Region called "Financial stability of the region in new global environment". At the session of Regional Governors Panel part of which was Deputy Governor Mehmeti, called "Monetary policy of the countries in the region - between American Federal Reserves and the European Central Bank", will consider recommendations of governors of central banks from the region to finance ministers on how to better coordinate monetary and fiscal policy, it will focus on the impact of quantitative incentives of ECB on monetary policy, interest rates and local currencies exchange rates in the Western Balkan. Another topic of the session was solving of problematic loans as well as assumption on increase of bank credit activity. The importance of maintaining the stability of the banking system was emphasized. Participants also exchanged views on exposure of the region to potential external shocks, interest rates on savings and loans in 2017. Deputy Governor Mehmeti in his speech mentioned the stability of the financial system that Kosovo enjoys, interlinking with the topic of the session on how to better coordinate monetary and fiscal policy and a real institutional cooperation. He also mentioned that the recent crisis has shown the necessity of coordinating various institutions to prevent crises and to remedy the consequences of financial crises in case of their occurrence. In cases like Kosovo, interinstitutional cooperation, especially between the Central Bank and the Ministry of Finance, is even more necessary when considering the monetary policy constraints caused by euroization. We can mention a good example of this cooperation, which has to do with the creation of an Emergency Liquidity Assistance Scheme for Banks, which was established with the co-financing by the Government and the Central Bank of the Republic of Kosovo. As for the possible consequences of the new policies of the FED and the ECB on monetary policy, interest rates and exchange rates of national currencies in the Western Balkans, Mehmeti said that since Kosovo uses the euro as the official currency, monetary policy changes do not have any direct impact on Kosovo. This is also due to the fact that Kosovo's main trading partners continue to be Eurozone and regional countries that have currencies that maintain a fairly stable exchange rate against the euro. This means that changes in the euro exchange rate do not have much impact on the Kosovo economy.
Also, the majority of loans and deposits in the Kosovo banking sector are denominated in the euro currency; therefore, the sector is well protected from exchange rate risk. Regarding the issue of solving problematic loans as a requirement for increasing the banking lending activity - experience in Kosovo, he underlined that the level of non-performing loans and problematic loans in relation to total loans in May 2017 was reduced to 4.3% from 5.6 % recorded in May 2016 respectively 6.0% from 7.2% recorded in May 2016.

The level of these indicators is comparable or below the average of European Union countries. The indicator of loan loss reserves in May 2017 increased to 136.2% from 117.7% marked one year earlier. Positive development is also reflected in capitalization indicators, marking the level of 18.8% and 16.8%, over regulatory requirements of 12.0% and 8.0% respectively.
In the ongoing Summit, the Panel is addressing financial inclusion, banks in the region, new trends in the global banking such as: What banks should do to increase the participation of citizens who use modern financial services; To what extent does the provision of basic financial services by the banks in the region impact the degree of financial inclusion, New technologies - the main potential for increasing financial inclusion in the countries of the region; Banks and the state - partners in an effort to reduce the number of citizens who are excluded from the financial system; Voluntary or forced financial "Exclusion" - Causes and Consequences; Financial inclusion and fight against gray economy; With new financial products to new users of banking services; Untapped potential - around 2.5 billion people in the world do not have bank accounts - what is the situation in the region; European integrations and financial inclusion - the importance of further development of the single financial market within the EU, in the region, as well as examples of good practices of regional banks. During his stay in Becici, Deputy Governor Mehmeti met with the governors of the banks of the region, such as Albania, Macedonia and Montenegro, praising the good cooperation between the institutions and the need for deepening of this cooperation. Participants of this summit are representatives from EBRD, central banks, finance ministries, regional banks, customs and tax administrations.