Joint conclusions of the economic and financial dialogue between the EU and the Western Balkan countries and Turkey: The CBK undertook appropriate prudential measures

The Central Bank of the Republic of Kosovo has welcomed conclusions drawn from the economic and financial dialogue between the European Union and the countries of the Western Balkans and Turkey, held on July 12, 2021.

Representatives of the Member States of the European Union, the Western Balkans and Turkey, the European Commission and the European Central Bank, as well as representatives of the central banks of the Western Balkans and Turkey met for their annual economic policy dialogue. The dialogue aims to prepare the Western Balkans and Turkey for their future participation in the European Semester.

In the joint conclusions of this meeting, on issues related to the financial sector in Kosovo, it is stated that: “The banking sector appears to have weathered the crisis well thanks to entering 2020 with ample capital and liquidity buffers and a low level of non-performing loans, which will help to mitigate credit losses that are yet to materialize once relief measures are phased out. Credit activity decelerated in 2020, especially in the first half of the year, driven by both supply and demand factors

Despite the crisis, the deposit base continued to rise, which supported the liquidity position of banks. Non-performing loans remained low compared to countries in the region, but as support measures can only prevent the bankruptcies of viable clients, asset quality and thus also banking sector profitability and capitalization levels are likely to deteriorate going forward. The central bank closely monitored financial stability challenges arising from the crisis and undertook appropriate prudential measures. Still, the low number of Central Bank employees in key policy areas continues to hinder a further enhancement of the analytical and monitoring toolkit, and its governance appears to have room for improvement (meaning filling vacancies in Central Bank Board) ”.

Further in the report, Kosovo is encouraged in terms of the financial system, to “Maintain a strong financial sector regulatory framework in line with international best and EU practices, ensure sound credit risk management, a transparent display of asset quality, adequate provisioning, and develop a more integrated framework for measuring household indebtedness. Further reduce the remaining institutional and legal obstacles for rapid and effective resolution of non-performing loans. Ensure the central bank’s effective functioning by undertaking an in-depth analysis of the staffing requirements in its key policy areas, especially financial stability and financial sector supervision and filling the vacant positions in the board needed to restore its quorum.

The Central Bank of the Republic of Kosovo remains committed to continue advancing reforms in the financial system in order to strengthen and further develop this sector, as well as meet the necessary criteria for advancement in the field of European integration. For more find the full report: https://data.consilium.europa.eu/doc/document/ST-10622-2021-INIT/en/pdf