The Governor of the Central Bank of the Republic of Kosovo (CBK), Fehmi Mehmeti, presented to the members of the Committee on Budget, Labor and Transfers, the section of the European Commission Report 2020 related to the CBK.
Addressing the members, Governor Mehmeti stated that Kosovo’s financial system is sustainable and stable, as confirmed in the reports of internationally renowned institutions, including the European Commission, which has positively assessed the CBK's contribution towards consolidating macroeconomic stability, preserving financial stability, enhancing supervisory practices and improving the payment system in the Republic of Kosovo.
“The report highlights that the movement of capital remains largely free in Kosovo and there are no restrictions on foreign ownership or investment in the financial sector, while in the field of payments the report applauds the approval by the CBK of regulations such as the new Regulation on Licensing and Oversight of Payment System Operators and Regulation on Electronic Payment Instruments, which eliminate additional fees for bank card holders. The report also recognizes the progress made in implementing the Basel III framework in the area of capital requirements, as well as in the banks' risk management. The Commission also commends the entry into force of the Regulation on Capital Adequacy and the Regulation on Leverage Ratio. The report notes that all of these acts are in line with the Basel III framework. In addition, it points out that the CBK has adopted the IFRS 9 standard and banks have been implementing it since January 2020. According to the European Commission, the level of capitalization of banks continues to remain stable at 15.9% and is considerable above the required capital adequacy ratio of 12%,” elaborated Governor Mehmeti.
The European Commission report devotes a special space to developments related to the impact of the pandemic on Kosovo’s economy, emphasizing the measures taken by the CBK to help borrowers overcome the financial difficulties that have arisen due the crisis, as well as the publication of the Guidelines on Loan Restructuring.
The EC welcomes the initiative taken by the Central Bank to increase the transparency of consumer credit pricing and solvency enforcement - Solvency I.
The report also commends the approval of the Regulation on the Repurchase of Securities with the Central Bank (approved in April 2019), which enables the repurchase of securities between commercial banks in the secondary market.
Governor Mehmeti added that the CBK remains one of the institutions with the highest degree of implementation of EU requirements over the years, based on statistical reports of the Government itself. He further stated that intensive work is being done starting from market liberalization in the provision of electronic payment services by non-bank financial institutions. In this regard, the Solvency II implementation roadmap framework has been developed with the support of World Bank experts.
Regarding the obligations arising from the Stabilization and Association Agreement, the CBK has continuously worked on the approximation of the legal and regulatory framework with that of the European Union.
“We have already approved 3 rules; Rule on pension benefits, Rule on record keeping in pension funds and pension providers and Rule on transfers and transfer payments of pension assets, which are in accordance with European Directive 2003/41. In addition, we have already finalized two regulations related to liquidity requirements - the Liquidity Coverage Index and the Sustainable Net Financing Indicator which are to be approved by the CBK Board. These requirements are in full compliance with the Basel III framework. We are also in the process of finalizing two rules in the field of pensions, Rule 24 prescribing the requirements in the letter of engagement of the external auditor of the pension fund and pension providers and Rule 25 amending the Rule on determining pension beneficiaries, which are expected to be approved soon,” he declared.
The members of the Committee were also informed about the work that is being done in further advancing the implementation of the Basel III framework, where the Regulation on the liquidity coverage indicator and the indicator of sustainable net financing have already been finalized.
The Governor said that with the support of the European Fund for Southeast Europe (EFSE) a platform is being developed for comparing interest rates and financial services provided by financial institutions in Kosovo. This platform will be launched on the official website of the CBK and aims to provide a space which will provide consumers easier use of information about interest rates and prices of financial products and services in the financial sector of Kosovo.
Governor Mehmeti also talked about the CBK’s work and commitment in the liberalization of the insurance market, which will take place during this year, while mentioning the need to address the issue of uninsured vehicles, as well as a series of regulations and laws that will be approved after the Assembly elects the members of the CBK Board and approves the pending laws.