IMF Second Review under SBA and RSF Arrangement: The Central Bank of the Republic of Kosovo strengthens regulatory framework and institutional reform agenda – banking system remains sound and financial soundness indicators remain strong


The Central Bank of the Republic of Kosovo (CBK) has received commendations from the International Monetary Fund (IMF) following the successful conclusion of the second review of the Stand-By Arrangement (SBA) and the Resilience and Sustainability Facility (RSF) programs. The IMF's review highlights the CBK's commitment to an ambitious institutional reform agenda, including new regulations.

The IMF has recognized the Central Bank of the Republic of Kosovo's adoption of a new Regulation on Cash Operations as essential in enhancing the payment system, tightening control over currency circulation, combating counterfeit money, and preventing money laundering and terrorism financing. It enforces the use of the euro as the sole legal tender, prohibits the operation of unlicensed financial institutions, and discourages large cash transactions by banning the re-circulation of €500 banknotes. These measures have contributed to a sounder, safer, and more transparent financial environment despite challenges and side effects.

In terms of governance, the CBK is implementing recommendations from the recent Safeguards Assessment to strengthen internal governance, risk management, and stress testing frameworks. This includes completing the Executive Board per the new organizational structure and issuing "Rules of Procedure" to enhance transparency and efficiency. Efforts to strengthen risk management include establishing a high-level inter-departmental Risk Committee and appointing a new director of the Risk Management Department, with ongoing initiatives to address cybersecurity challenges.

The CBK has also finalized a new Law on Banks to improve licensing criteria, standardize operations, and strengthen recovery, resolution, and liquidation processes. With the support of the World Bank and the IFC, new laws on microfinance institutions and payment services are being finalized. The CBK continues to strengthen internal control systems and risk management practices based on the Fund Safeguards Assessment report recommendations.

Additionally, the CBK is working to Green Agenda of the financial system by instructing banks to monitor and report data related to climate risks. Collaboration with the World Bank aims to strengthen the regulatory framework to manage environmental and climate-related risks in the banking sector.

The IMF's assessment also acknowledges that the banking system remains sound, with banks being well-capitalized, having ample provision coverage, high liquidity, and profitability. Non-Performing Loans (NPLs) have remained low, and real credit growth, especially in household lending, has been robust.

The IMF's positive assessment underscores the CBK's proactive approach to strengthening governance, financial stability, and sustainability, positioning Kosovo's financial sector for continued growth and resilience. The Central Bank of the Republic of Kosovo expresses the highest consideration to the IMF staff mission for their excellent cooperation and valuable discussions during the mission and their continuous support in various fields.

The published review report of the IMF is attached at this link: