04/11/2009

Dear President of Republic of Kosovo,
Dear Prime Minister,
Dear Ladies and Gentlemen,
Dear Colleagues and Guests,

It is my true pleasure to welcome you on the celebration of the 10th anniversary of the Central Bank of Republic of Kosovo.

Ten years may be a relatively short period of time for a country, but for Kosovo these ten years represent the most important chapter of its history during which the institutional framework for the normal functioning of the country was completed. Today, I am proud to lead the Central Bank which within a decade was built in a strong institution and is amongst the main generators of financial stability and economic development of our country.

There were many important turning points which have determined the path of Central bank development and Kosovo financial system. There were many important decisions taken during the last ten years: from setting up the governance structures of the central bank; cash supply, establishing the grounds of a modern financial sector to the beginning of negotiations for the Republic of Kosovo to become member of international financial institutions. However, one of the most important moments was definitely a decision for a German Mark to become official currency within the boundaries of today’s independent Republic of Kosovo. On 2002, the CBK has successfully managed the changeover from German mark to Euro, and today the Euro represents the hallmark of the stability and development of Kosovo’s economy although some may question its role in supporting the macroeconomic framework.  Euro significantly contributed to the creation of credible environment for the exercise of business activity in Kosovo, including the financial intermediation activities. Despite the fact, that it does not belong to the EUROSYSTEM, Kosovo benefits from the monetary stability of Euro zone. Indisputably, this stability is a great asset for moving towards Europe.

Looking back, a decision to establish the CBK was visionary and it was strongly supported by the international community. Since the beginning the CBK during its development was strongly supported by the International Monetary Fund, USAID and World Bank. In the first eight years, managing director of the Central Bank were appointed and financed by the International Monetary Fund.  And it is great pleasure that I can welcome and greet most of them in this Auditorium. They helped us by providing the expertise and we were able to work and learn the virtue of central banking in order for the Central bank of Kosovo to be as effective and efficient as other central banks.  I am taking this opportunity to thank them all for their commitment to build our central bank together with us.

Since the proclamation of independence in 2008, we have proved to ourselves and international community that we can run our institution credibly, successfully and responsibly.  I am proud of achievements during these years, and especially for the membership in the International Monetary Fund and the World Bank which happened in May this year. The recognition of such an important international financial institution as the International Monetary Fund and the World Bank is convincing proof that we are doing a good job. Our potential will be fully utilized to support further integration of the Republic of Kosovo in other international organizations.

The Republic of Kosovo’s institutions have developed fast and efficiently since the country independence. There is a great sense of cooperation and mutual effort among our institutions to put the Kosovo’s economy on the track of sustainable long term development. As we are the newest of the states in the world, we are privileged to learn from the experiences of other countries that fit into the characteristics of our national economy. The Republic of Kosovo has potential to develop any further. It is our responsibility, together with our international partners support, to assure a sustainable economic development and higher living standards   for our citizens as the safest way towards European Union integrations.

Today, the Central Bank builds the confidence and credibility on economy and public on four pillars of its responsibility. Firstly, we are financial regulator taking care of the proper functioning of the financial system and ensuring financial stability of our economy. Secondly, we assure stable and efficient payment system. Thirdly, we act as fiscal agent for the Government. And finally, we compile and economic and financial analysis, provide economic advice to the Government and prepare reliable monetary, financial and balance of payments statistics.

As the world economy is facing one of the most difficult and devastating economic crisis in history, the Kosovo’s economy seems to be isolated to some extent from the recent developments in the world economy. This is the result of rather small international involvement of the Kosovo’s economy in the world markets. However, economic growth forecasts for 2009 are lower compared to the previous year suggesting a growth rate of 4% of GDP compared to 5.4 percent in 2008 which, nevertheless, remains positive.

The financial sector continued to operate normally and also increase even in during the crisis time.  This resilience of the banking sector largely reflects the high commitment of the Central Bank to safeguard the prudent behavior of the financial institutions. Nevertheless, the CBK together with the Government of Kosovo were proactive in undertaking measures necessary to absorb potential shocks from global crisis implications that might hit the financial system and our economy. In this respect, in the first quarter of 2009, the Central Bank, Ministry of Economy and Finance and Kosovo Assembly Commission for Budget and Finance signed the Memorandum of Understanding on financial stability and also established National Commission for financial stability. 

In its capacity as financial supervisor, in 2008, the Central Bank continued to adopt the prudential and supervisory practices in order to advance capacities in the supervision of the banking sector and insurance industry. In this respect, the CBK exercised the best supervisory practices, conducted prudential measures in the financial system, and systematically followed recommendations of international financial organizations and foreign counterparts. It is our intention to continue our work on prudently supervision of financial system, hence, safeguarding the financial stability and to contribute to the economy as a whole. 

Throughout the years, we have developed close and professional cooperation with home supervisory institutions for all foreign owned banks and insurance companies that operate in Kosovo. The stable and investment-promoting environment has led to a continuous growth in the number of financial institutions operating in Kosovo and new entries in this sector with positive implications for the level of competition in this market. As a result, we are witnessing a continuous expansion in the range of financial products and instruments present in the market, while the cost of intermediation is improving.

Actually, in Kosovo there are operating 8 commercial banks, 11 insurance companies, 2 pension funds, 19 micro-finance institutions, 21 exchange bureaus and 5 money transfer agencies. Compared to the averages in the region, the financial sector of the Republic of Kosovo is to some extent still moderate in size.  However, slowly but steady we are bridging the gap also in the level of financial sector development.

We are proud of our achievements but also aware of new challenges and possibilities ahead. There is a new Law of the Central Bank waiting in the Parliament which will shape our institution in modern and even more effective manner. The Law on Public Debt is in the procedure that will create opportunities for the capital market development.   And also the Law on Deposit Insurance will increase security and confidence of depositors in banks in Kosovo banks.  Integration of Kosovo in the regional economy,  membership in  international organizations such as European Bank for Reconstruction and Development, Society for Worldwide Interbank Financial Telecommunication (SWIFT), the  Green Card Bureau are priorities and new responsibilities for the CBK.  And all these challenges prove that we have much work to do.  

Finally I am grateful that so many of you came today to celebrate with us. And the best way to celebrate such an important event is to work together and exchange ideas in the topics foreseen to be discussed today. It is our job to think and to find better ways for our financial system and the economy as whole to perform efficiently, effectively, and successfully.

The Central Bank of Kosovo has proven throughout all these years that it is a credible, reliable and trustworthy institution. Therefore, I thank you all for coming to celebrate our achievements, discuss challenges and also I would like to thank you one more time for your contribution in building the capacities of a modern central bank as is the Central Bank of the Republic of Kosovo.

Thank you!
Governor’s speech on the occasion of the CBK 10th anniversary