Financial Supervision Departments

Financial Supervision Departments

Banking Supervision Department

Based on Law 03/L-209, the Central Bank of the Republic of Kosovo has as its primary objective the promotion and maintenance of a stable financial system. This objective is directly related to the duties and responsibilities of the Banking Supervision Department.

Main responsibilities:

    • Supervision of banking institutions;
    • Defining policies to promote and maintain the stability of the financial system;
    • Collection, analysis and publication of relevant financial information;
    • Cooperation and participation on behalf of the CBK in relevant national and international councils and organizations; and
    • Implementation and development of policies, best practices for the regulation and supervision of financial activity with the aim of ensuring the stability of the banking system, respectively reducing the risk of loss for depositors.

Tasks:

    • Compiles and organizes the supervisory strategy of banks;
    • Conducts on-site on off-site supervisory activities of banks;
    • Assesses the adequacy and effectiveness of governance, including the performance of boards of directors, executive management bodies, and other management levels, in accordance with applicable legislation;
    • Monitors and assesses the level of exposure of banks to credit risks and other relevant risks, risk management systems, capital requirements to cover risks, the method of risk assessment, the performance and sustainability of financial results;
    • Supervises the compliance of banks' activities with the legal and regulatory supervisory framework and best practices related to their activities;
    • Assesses the adequacy and suitability of policies, procedures, systems and methodologies for risk management;
    • Assesses the adequacy and effectiveness of internal audit systems for the timely identification and follow-up of identified weaknesses;
    • Recommends the imposition of administrative measures that should be taken against banks, to raise awareness and improve governance in accordance with the legislation in force;
    • Proposes enforcement measures against banks, as well as monitors the implementation of recommendations, requests and enforcement measures imposed on them;
    • Verifies the accuracy and completeness of reports submitted by banks;
    • Prepares and publishes analyses and reports on the financial condition of banks;
    • Participates in the drafting of relevant policies, regulatory documents and internal rules; and
    • Participates in and represents the CBK in relevant national and international councils and organizations; and
    • Implements applicable legislation and CBK regulations as well as supervisory methodology.

On-Site Supervision Division

This Division includes the assessment of banking risks such as: credit risk, liquidity risk, operational risk, market risk and other risks, through the adoption and development of a risk-based supervision approach, through analyses or assessments based on financial data reported by banks, as well as during on-site examinations.

Off-Site Supervision Division

The division includes the supervision, analysis, evaluation and interpretation of financial data reported by banks and other financial institutions as well as the assessment of financial trends. Monitoring the financial health of banks, identifying institutions that show financial deterioration are the primary tasks of this function of the Banking Supervision Department.

Department of Market Supervision, MFI, NBFI, PI, EMI

The main responsibility of the Department is the Supervision of Microfinance Institutions (MFIs) and Non-Banking Financial Institutions (NBFIs), Payment Institutions (PIs) and Electronic Money Institutions (EMIs)

Main responsibilities:

    • Supervision of microfinance institutions, leasing institutions, payment services and electronic money institutions, credit institutions, exchange offices, money transfer agencies and all other financial institutions except insurance companies and pension funds;
    • Defining policies to promote and maintain the stability of the financial system;
    • Collection, analysis and publication of relevant financial information;
    • Cooperation and participation on behalf of the CBK in relevant national and international councils and organizations; and
    • Implementing applicable legislation and CBK regulations as well as supervisory methodology

Division of Supervision of MFIs, NBFIs, PIs and EMIs

  • Tasks:

    • Compiles and organizes the supervisory strategy of MFIs and NBFIs (PI and EMI);
    • Conducts on-site and off-site supervisory activities of MFIs and NBFIs (PIs and EMIs);
    • Assesses the adequacy and effectiveness of governance, including the performance of boards of directors, executive management bodies, and other management levels, in accordance with applicable legislation;
    • Monitors and assesses the level of exposure of MFIs and NBFIs (PIs and EMIs) to credit risks and other relevant risks, risk management systems, capital requirements to cover risks, the method of risk assessment, performance and sustainability of financial results;
    • Supervises the compliance of the activities of MFIs and NBFIs (PI and EMI) with the supervisory legal and regulatory framework and best practices related to their activities;
    • Assesses the adequacy and suitability of policies, procedures, systems and methodologies for risk management;
    • Assesses the adequacy and effectiveness of internal audit systems for the timely identification and follow-up of identified weaknesses;
    • Recommends the imposition of administrative measures that should be taken against MFIs and NBFIs (PI and EMI) to raise awareness and improve governance in accordance with the legislation in force;
    • Proposes enforcement measures against MFIs and NBFIs (PI and EMI) and monitors the implementation of recommendations, requests and enforcement measures imposed on them;
    • Verifies the accuracy and completeness of reports submitted by MFIs and NBFIs (PIs and EMIs);
    • Prepares and publishes analyses and reports on the financial situation of MFIs and NBFIs (PI and EMI);
    • Participates in the drafting of relevant policies, regulatory documents and internal rules; and
    • Participates and represents the CBK in relevant national and international councils and organizations.
    • Supervises, analyzes, evaluates and interprets financial data reported by MFIs, NBFIs, PIs and EMIs;
    • Monitors the financial health of microfinance institutions and non-bank financial institutions by identifying institutions that show financial deterioration; and
    • Supervises, analyzes, evaluates and interprets financial data reported by MFIs, IFIBs, PIs and EMIs as well as assessing financial trends.

Division of Markets Supervision and FinTech, Crypto-assets and Innovation

  • Tasks:

    • Drafting and implementing policies for regulating Fintech and crypto-asset companies in accordance with financial regulations;
    • Monitoring market developments and assessing potential risks associated with Fintech and crypto-assets;
    • Supervision of companies offering cryptocurrency-related services, ensuring compliance with Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) regulations;
    • Fostering partnerships between regulatory bodies, industry participants and academic institutions;
    • Organizing seminars and events to promote knowledge sharing and innovation;
    • Providing strategic guidance to companies leveraging Blockchain, Artificial Intelligence and other emerging technologies;
    • Advising senior management on trends and challenges in the Fintech and Crypto-asset markets.
    • Representing the CBK in forums, conferences and regulatory discussions; and
    • Continuous update on global regulatory frameworks for Fintech and crypto-assets.

Market supervision is normally regulated by the Capital Markets Law and secondary regulations.

This Law should define:

    • Conditions for the establishment, licensing, supervision and dissolution/closure of companies/corporations,
    • Conditions for trading financial instruments on a regulated market or trading outside a regulated market;
    • Conditions for the provision of regulated activities and regulated services;
    • Conditions for offering Securities to the public and trading Securities on a regulated market;
    • Requests for information from companies carrying out activities regulated by the Capital Market Law;
    • Preventive measures against market abuse and insider trading;
    • The powers and activities of the regulatory authority (e.g. CBK in this case or any other regulatory authority if established) under this law.

Tasks:

    • Formulate and approve secondary regulations supplementing the Market Law that will assist in market supervision;
    • Formulate codes of conduct for licensed entities (Market Conduct);
    • Supervise licensed institutions and activity in the regulated market;
    • License and supervise clearing houses or the relevant authority that carries out Settlement and Clearing;
    • Establish rules and practices for corporate governance of corporations that issue Securities;
    • Establish rules and practices for risk management;
    • Establish investment rules and practices;
    • Establish rules and procedures to ensure transparency for listed companies;
    • Establish rules and procedures for short-selling, dispute resolution, sanctions and penalties;
    • Establish rules and procedures for listing and trading of financial instruments on stock exchanges or over-the-counter markets;
    • Establish rules for the issuance of Securities;
    • Establish rules for the delisting of financial instruments (removal of instruments from the stock exchange).

Department of Insurance and Pension Supervision

The main responsibility of the Department of Insurance and Pension Supervision is the supervision of financial insurance and pension institutions.

 

Furthermore, other tasks that are the responsibility of the DIPS are the supervision of insurance and pension companies; the collection and publication of relevant financial information; cooperation and participation, on behalf of the CBK, in relevant national and international councils and organizations.

 

The Department aims to implement and develop policies, best practices for the regulation and supervision of insurance activities, with the aim of ensuring the stability of the insurance system. The Insurance Supervision Department and the Pension Supervision Division implement the legislation in force and the CBK regulations as well as the supervisory methodology.

On-Site Supervision Division

Off-Site Supervision Division

    • Tasks:

      • Accepts and reviews monthly premium and claims reports as well as related reporting;
      • Accepts and reviews the annual business plans of insurance companies;
      • Accepts and reviews the quarterly financial statements of insurance companies, as well as prepares relevant analyses regarding liquidity and insurance risk, the company's financial strength, the minimum required capital, technical provisions and other liabilities, the minimum solvency margin, the company's financial performance, the reinsurance program and contracts, and other relevant indicators; and
      • Reviews the reports of the external auditor of insurance companies and insurance intermediaries, and prepares the relevant annual reports, following up and addressing as necessary.

The Actuary who reports to the Director of the Insurance Supervision Department shall also report to the Deputy Governor for Financial Supervision and to the Governor upon request.

Pension Supervision Division

The Central Bank of the Republic of Kosovo has as its primary objective the promotion and maintenance of a stable financial system. This objective is directly related to the duties and responsibilities of the Pension Supervision Division. The main responsibility of the PSD is the supervision of pension funds.

Furthermore, the tasks that are the direct responsibility of the PSD are the supervision of pension funds, such as collecting, analyzing relevant financial information, cooperating and participating on behalf of the CBK in relevant national and international councils and organizations. The scope of supervision of pension funds is specified in the Law on Pension Funds of Kosovo, as well as secondary legislation.

The Pension Supervision Division aims to implement and develop policies, best practices for the regulation and supervision of pension fund activities.

    • Tasks:

      • Compiles and implements the supervisory strategy of pension funds;
      • Prepares the annual examination plan and implements the approved examination plans based on relevant legislation and manuals;
      • Analyzes and conducts on-site examinations of pension funds;
      • Recommends the imposition of measures to be taken and monitors the fulfillment of recommendations by pension funds;
      • Participates in the drafting of policies and regulatory documents and internal regulations relevant to the supervision of pension funds; and
      • Oversees the compliance of pension funds' activities with the legal and regulatory supervisory framework and best practices related to their activities.

Licensing and Standardization Department

The main responsibility of the Licensing and Standardization Department is the licensing of all financial institutions, aspects of their regulation and standardization, as well as the protection of their clients.

Main responsibilities:

    • Implementation of the legal framework for licensing, registration and regulation of all financial institutions;
    • Building and developing an appropriate legal and regulatory framework for financial supervision, implementing and complying adequately with laws, regulations and financial supervision standards in order to promote and maintain the stability of the financial system, as well as following up and monitoring the market behavior of financial institutions oriented in particular towards adequate disclosure and consumer protection; and
    • Implementation and development of international policies and best practices for licensing, registration and regulation of financial activity.

Licensing Division

    • Tasks:

      • Examines the requirements for licensing financial institutions, ensuring the entry into the financial market of only those institutions that have sufficient capital for measuring and monitoring risk, policies and procedures for its control, and that propose to have administrators with a high level of qualification, professionalism and ethics;
      • Reviews requests for preliminary approvals necessary during the time the institution carries out its activities;
      • Ensures and verifies the accuracy and completeness of documentation of requests for licensing/registration/authorization as a separate financial institution;
      • Reviews documentation of financial institutions' requests for approval regarding ownership, governance, administrative or operational aspects;
      • Consults on an ongoing basis with the Regulation and Standardization Division, as well as the Legal Department, and cooperates with other organizational units of financial supervision regarding the handling of requests for licensing/registration/authorization or approval;
      • Prepares recommendations for decisions regarding requests for licensing/registration/authorization or approval, as well as regarding revocations of licenses/registrations/authorizations granted or repeals of preliminary approvals;
      • Maintains central registers of licensed/registered/authorized financial institutions, as well as those whose license/registration/authorization has been revoked; and
      • Evaluation of applications for licenses, registrations or participation in the Sandbox.

Regulation and Standardization Division

    • Tasks:

      • Building a regulatory framework, consisting of a set of minimum criteria and rules to be implemented by the financial industry;
      • Its continuous improvement and review to be in full harmony with international standards,
      • Monitoring the applicability of the legal framework, the adoption of international principles and best practices;
      • The process of continuous methodological and practical improvement of the financial institutions supervision model in order to standardize it;
      • Further increase in effectiveness;
      • Expanding risk assessment capacities;
      • Cooperating with relevant financial supervision units to ensure coordination and implementation of joint activities, participation in the review and development of supervisory practice and methodology;
      • Drafting policies, regulatory acts and relevant internal acts of financial supervision;
      • Monitoring and analysis of relevant developments, especially EU regulations and directives and Basel Standards and international best practices;
      • Interpretation of various requests coming from financial institutions regarding the implementation of the regulatory framework within the competencies and functions of the Department;
      • Drafting of bylaws, guidelines and methodology in order to meet the objectives for the recovery and resolution of financial institutions;
      • Compilation of reporting methodology for financial institutions;
      • Cooperation with the Planning, Strategy and Coordination Division within the Recovery and Resolution Department; and
      • Close collaboration with the Legal and Compliance Department regarding the drafting and harmonization of the legal and regulatory framework.

Division for Prevention of Money Laundering and Financing of Terrorism

The Central Bank of the Republic of Kosovo has as its primary objective the preservation and maintenance of a stable financial system. This objective is linked to the duties and responsibilities of the Division for the Prevention of Money Laundering and Financing of Terrorism. This Division is responsible for the supervision of financial institutions with a focus on the prevention of money laundering and the financing of terrorism.

 

The tasks to which the Division for the Prevention of Money Laundering and Financing of Terrorism contributes include the supervision of financial institutions, in terms of preventing money laundering and financing of terrorism, cooperation and participation in relevant international councils and organizations, and the definition of policies for promoting and maintaining the stability of the financial system. The task of preventing money laundering and financing of terrorism is not specifically mentioned in the Law on the CBK. It is the Law on the Prevention of Money Laundering and Financing of Terrorism that addresses this task and also specifies the respective role of the CBK. The CBK has also developed its own regulations in the field in question.

 

The Division for the Prevention of Money Laundering and Financing of Terrorism aims to ensure compliance of financial institutions with the legislation and regulations in force, which govern the prevention of money laundering and financing of terrorism. In close cooperation with the Financial Intelligence Unit, as the primary authority in this field, and with other relevant entities, this Division contributes to the development and implementation of adequate national strategies for managing the relevant risks.

Activities:

    • Advancing and ensuring the implementation of the legal framework in order to prevent money laundering and terrorist financing;
    • Supervision of financial institutions within the framework of the function of preventing money laundering and combating the financing of terrorism;
    • Strengthening cooperation and increasing diligence for the financial sector in terms of preventing money laundering and combating the financing of terrorism;
    • Systematic risk assessment and monitoring of trends in terms of preventing money laundering and terrorist financing; and
    • Active monitoring and tracking of transactions technically with payment systems managed by the CBK.

Tasks:

    • Conducting on-site and remote examinations of financial institutions within the framework of the function of preventing money laundering and combating the financing of terrorism;
    • Risk analysis of the bank and financial institution, in terms of the risk of use for money laundering purposes, including ownership control and the types of banking products that the bank uses;
    • Assessment of policies and procedures in terms of PML/CFT and the level of their implementation;
    • Assessing the role and function of PML/CFT compliance;
    • Assessment according to the principle of Due Diligence and Enhanced Customer Due Diligence;
    • Evaluation of account opening procedures;
    • Evaluation of procedures for specific categories of clients;
    • Assessment of transactions, data and document storage, according to the principle of enhanced customer due diligence;
    • Evaluation of funds transfers, correspondent banks and similar relationships;
    • Assessing the role of the PML/CFT compliance function and internal audit;
    • Assessment of the level and quality of reporting of cash transactions, equivalent to or exceeding 10,000 euros to the FIU-K;
    • Recommending to the Executive Board the imposition of administrative measures that should be taken against banks and financial institutions to raise awareness and improve the management of the bank or financial institution regarding PML/CFT;
    • Preparing examination reports of financial institutions, including necessary recommendations for the examined financial institution;
    • Organizing and holding informational and consultative meetings with financial institutions based on the needs presented;
    • Continuous assessment of the risk of money laundering and terrorist financing of the financial sector;
    • Continuous monitoring of transactions and activities for suspicious or unusual behavior that may indicate money laundering or terrorist financing;
    • Drafting necessary acts and guiding documents in order to prevent money laundering and combat the financing of terrorism;
    • Preparation of annual work plans of the DPML, including the plan for conducting on-site examinations;
    • Active monitoring and tracking of transactions technically with payment systems managed by the CBK;
    • Review of requests from financial institutions for approval of senior managers for the prevention of money laundering and combating the financing of terrorism;
    • Cooperation with the LSD in the framework of the exchange of information regarding the assessment of the suitability of natural and legal persons in the field of PML/CFT;
    • Cooperation and coordination with the FIU-K regarding the exchange of information regarding PML/CFT as well as undertaking joint activities regarding the supervision of financial institutions for PML/CFT compliance;
    • Cooperation with the BSD in the framework of the exchange of information regarding the compliance of banks with PML/CFT; and
    • Cooperation with the ISD in the framework of the exchange of information regarding the compliance of insurers with PML/CFT.

Division for Supervision of Information Technology Systems of Financial Institutions

The focus of the Division for Supervision of Information Technology Systems of Financial Institutions will be on the risks to which they expose the institution, which are included in the framework of operational risk according to the CBK definitions. These risks can have a negative impact on the financial result of a financial institution and its capital level.

 

The focus of the Division for Supervision of Information Technology Systems of Financial Institutions is to ensure the adoption of adequate risk management systems resulting from this area, as well as to build a system of early action and prevention of damages that may arise from these risks for the financial sector, through the adoption of international best practices.