Financial Supervision Departments

Financial Supervision Departments

Department for Supervision of Banks, MFIs and NBFI, PI and IPE

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

The main responsibility of this Department is the supervision of banks, microfinance institutions and non-bank financial institutions.

    • Supervision of banking institutions, microfinance institutions, institutions dealing with leasing, payment services, credit institutions, exchange offices, money transfer agencies and all other financial institutions except insurance companies and pension funds;
    • Defining policies for promoting and maintaining the stability of the financial system;
    • Collection, analysis and publication of relevant financial information;
    • Cooperation and participation on behalf of CBK in relevant national and international councils and organizations;
    • Implementation and development of policies, best practices for the regulation and supervision of financial activity in order to ensure the stability of the banking system, respectively reducing the risk of loss for depositors.

The tasks of the Department for Supervision of Banks, MFIs and NBFI, PI and IPE are:

    • Compiles and organizes the supervisory strategy of banks, MFIs and NBFI (IP and IPE);
    • Performs supervisory activities in the country and abroad of banks, MFIs and NBFI (IP and IPE);
    • Evaluates the suitability and effectiveness of governance, including the performance of boards of directors, executive management bodies, as well as other management levels, in accordance with the applicable legislation;
    • Monitors and assesses the level of banks, MFIs and NBFI (IP and IPE) exposure to credit risks and other relevant risks, risk management systems, capital requirements to cover risks, risk assessments methods, progress and stability of the financial result;
    • Supervises compliance of banks, MFIs and NBFI (IP and IPE) activity with the legal and regulatory supervisory framework and the best practices related to their activity;
    • Assesses the adequacy and appropriateness of policies, procedures, systems and methodologies for risk management;
    • Evaluates the adequacy and effectiveness of internal audit systems for the timely identification and follow-up of identified weaknesses;
    • Evaluates the adequacy and effectiveness of information technology systems;
    • Recommends the imposition of administrative measures that should be taken against banks, MFIs and NBFI (IP and IPE ) for awareness and improvement of governance in accordance with the applicable legislation;
    • Proposes coercive measures against banks, MFIs and NBFI (IP and IPE) as well as monitors the implementation of recommendations, requirements and coercive measures imposed on them;
    • Verifies the accuracy and completeness of reports submitted by banks, MFIs and NBFI (IP and IPE);
    • Prepares and publishes analyses and reports on the financial condition of banks, MFIs and NBFI (IP and IPE);
    • Participates in the drafting of policies, regulatory documents and relevant internal rules;
    • Participates and presents CBK in relevant national and international councils and organizations.
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The activity of the BSD is divided into three separate functions (divisions): the On-Site Supervision Division, Reporting and Analysis Division, and the Microfinance Institutions (MFI) and Non-Banking Financial Institutions (NBFI) Supervision Division, including IP and IPE.

On-Site Supervision Division for commercial banks

The On-Site Supervision Division for commercial banks - includes the assessment of banking risks such as: credit risk, liquidity risk, operational risk, market risk and other risks, by adopting and developing a risk-based supervision approach, through analysing, i.e. assessments based on financial data reported by banks, as well as during on-site examinations.

Reporting and Analysis Division

Reporting and Analysis Division - includes the analysis, evaluation and interpretation of financial data reported by banks and other financial institutions, as well as the assessment of financial trends. The primary task of the of Banking Supervision on Department  is to monitor the financial health of banks, microfinance institutions and non-banking financial institutions by identifying institutions that show financial deterioration.

On-Site Supervision Division for microfinance institutions and non-banking financial institutions

The On-Site Supervision Division for microfinance institutions and non-banking financial institutions - includes, in accordance with the approach applied to commercial banks, the risk assessment of institutions in question, including credit risk, liquidity risk and other risks, through the adaptation and development of the risk-based supervision approach. This is done based on the analysis/assessment of financial data reported by financial institutions as well as during on-site examinations.

Personnel

This Department currently has (24) twenty-five people engaged, including the head of the Department.

Insurance Supervision Department

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

 

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

 

The Insurance Supervision Department aims to implement and develop policies, best practices for the regulation and supervision of insurance activity, in order to ensure the stability of the insurance system.

 

The ISD activity is divided into two separate divisions: Reporting and Analysis Division and the On-Site Supervision Division.

Additionally, the Insurance Supervision Department performs the following main functions:

      • Compiles and organizes the supervisory strategy of insurance companies;
      • Assesses the adequacy and effectiveness of governance, including the performance of the boards of directors, management and other levels, in accordance with the legislation in force;
      • Supervises the compliance of the insurance companies’ activity with the applicable legal framework and the best practices related to their activity;
      • Assesses the adequacy and effectiveness of information technology systems;
      • Prepares the examination plan and implements the approved examination plans based on relevant manuals;
      • Conduct thorough and focused examinations of insurance companies;
      • Follows the implementation of the required measures based on the findings;
      • Participates in the drafting of policies, regulatory instruments and relevant internal rules.

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

Personnel

This Department currently has (17) seventeen people engaged, including the head of the Department.

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 customers.

  • 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, implementation and adequate compliance with laws, regulations and standards of financial supervision in order to promote and maintain the stability of the financial system, as well as tracking and monitoring market behaviour in financial institutions particularly oriented towards adequate disclosure and consumer protection;

  • Implementation and development of international best policies and practices for licensing, registration and regulation of financial activity.

 

Licensing Division

Duties of the Licensing Division are:

    • Examines the requirements for the licensing of financial institutions, ensuring the entry into the financial market of only those institutions that have sufficient capital for risk measurement and monitoring, policies and procedures for its control and that propose to have administrators with high qualification, professionalism and ethical levels;
    • Examines the requests for necessary preliminary approvals while the institution develops its activity;
    • Ensures and verifies the accuracy and completeness of documentation requirements for licensing/registration/authorization as a separate financial institution;
    • Examines the documentation of financial institutions' requests for approval related to property, governance, administrative or operational aspects;
    • Constantly consults 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 licensing/registration/authorization or approval requests;
    • Prepares recommendations for decisions related to requests for licensing/registration/authorization or approval, as well as related to revocations of licenses/registrations/authorizations granted or cancellations of prior approvals;
    • Maintains central registers of licensed/registered/authorized financial institutions, as well as those whose license/registration/authorization has been revoked.
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Methodology and Standardization Division

The tasks of the Methodology and Standardization Division are:

    • Building a regulatory framework, consisting of a set of minimum criteria and rules to be implemented by the financial industry;
    • Its continuous improvement and revision to be in full harmony with international standards,
    • Monitoring the applicability of the legal framework, adaptation of principles and best international practices;
    • The process of continuous methodological and practical improvement of the supervision model for financial institutions in the function of its standardization;
    • Further increase in effectiveness;
    • Expansion of risk assessment capacities;
    • Cooperation with relevant units of financial supervision to ensure coordination and realization of joint activities; participation in the review and improvement of supervisory practice and methodology;
    • Drafting of 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 related to the implementation of the regulatory framework within the competences and function of the Department;
    • Drafting of by-laws, guidelines and methodology in order to fulfil the objectives for the recovery and closure of financial institutions;
    • Compilation of the reporting methodology of financial institutions;
    • Cooperation with the Division of Planning, Strategy and Coordination within the Recovery and Closure Department.
    • Collaborates closely with the Legal and Compliance Department regarding the drafting and harmonization of the legal and regulatory framework
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Personnel

This department currently has (15) fifteen people engaged, including the Head of the Department.

 

Prevention of Money Laundering and Financing of Terrorism Division

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

 

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

 

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

The main activities of the Prevention of Money Laundering and Terrorist Financing Division are:

    • Advancing and ensuring the implementation of the legal framework in order to prevent money laundering and terrorist financing;
    • Supervision of financial institutions within the function of preventing money laundering and combating the financing of terrorism;
    • Strengthening cooperation and increasing care for the financial sector in terms of preventing money laundering and combating the financing of terrorism;
    • Systematic risk assessment and monitoring of trends regarding the prevention of money laundering and terrorist financing;
    • Active monitoring and supervision of transactions in a technical manner with the payment systems managed by the CBK.
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Specifically, the Money Laundering and Terrorist Financing Prevention Division performs the following tasks:

    • Carrying out on-site and remote examinations of financial institutions within the function of preventing money laundering and combating the financing of terrorism;
    • Analysis of the risk of banks and financial institutions, in terms of the risk of use for money laundering purposes, including ownership control and the types of banking products that the bank uses;
    • Evaluation of policies and procedures in terms of PPP/LFT and the level of their implementation;
    • Assessment of the compliance role and function for PPP/LFT;
    • Assessment according to the principle of due and increased customer care;
    • Assessment of account opening procedures;
    • Evaluation of procedures for special categories of clients;
    • Assessment of the storage of data, documents and transactions, according to the principle of increased customer care;
    • Assessment of fund transfer , correspondent banks and similar relationships;
    • Assessment of the role of the PPP/LFT compliance function and internal audit;
    • Assessment of the level and quality of cash transactions reports, equal to or more than EUR 10,000 to FIU-K;
    • Recommends to the Executive Board the imposition of administrative measures that must be taken against banks and financial institutions for the awareness and improvement of the management of the bank or financial institution regarding PPP/LFT;
    • Preparation of examination reports of financial institutions, including necessary recommendations for the examined financial institution;
    • Organizing and holding informative and consultative meetings with financial institutions based on the needs presented.
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Personnel

This Division currently has (5) five people engaged, including the head of the Division.

Pensions and Markets Supervision Division

Based on Law no. 03/L – 209, the Central Bank of the Republic of Kosovo (CBK) has the promotion and maintenance of a stable financial system as its primary objective. This objective is directly related to the duties and responsibilities of the Pension and Securities Division and Market Supervision Division. The main responsibility of PSD and MSD is the supervision of pension funds and the securities market.

Moreover, the tasks that are the direct responsibility of the PSD and the MSD are: supervision of pension funds and the securities market; collecting, analysing relevant financial information; cooperation and participation on behalf of CBK in relevant national and international councils and organizations. The field of pension funds supervision is specified by the Law on Pension Funds of Kosovo, as well as secondary legislation.

Pension and Market Supervision Division aims to implement and develop policies, best practices for the regulation and supervision of the activity of pension funds and the securities market.

Pension Supervision Division performs the following main functions:

    • Compiles and implements the supervisory strategy of pension funds;
    • Prepares the annual examination plan and implements the approved examination plans based on the relevant legislation and manuals.
    • Analyses and performs on-site examinations of pension funds
    • Recommends the pronouncement of the measures that must be taken and monitors the fulfilment of the recommendations by the pension funds;
    • Participates in the drafting of policies and regulatory documents and relevant internal regulations for the supervision of pension funds
    • Supervises compliance of pension funds activity with the supervisory legal and regulatory framework and the best practices related to their activity.
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Markets Supervision

Market supervision is normally regulated by the Law on Capital Market and secondary regulations. This law must determine:

      • Conditions of establishment, licensing, supervision and dissolution/closure of companies/corporations
      • Conditions for trading in financial instruments on a regulated market or trading outside a regulated market;
      • Conditions for providing regulated activities and regulated services[1];
      • conditions for offering securities to the public and trading securities on a regulated market;
      • Requests information from companies that perform activities regulated by law for the capital market;
      • Preventive measures of market abuse and insider trading;
      • Competencies and activities of the regulatory authority (e.g. the CBK in this case or any other regulatory authority if established) under this law.

       

       

The functions of the division within the market supervision are:

    • Formulate and approve​ supplementary secondary regulation of the Law on Market that will help market supervision
    • Formulate the codes of conduct of the licensed subjects (market conduct)
    • Supervise licensed institutions and activities in the regulated market
    • License and supervise clearing houses or relevant authorities that makes settlement and clearing
    • Establish rules and practices for corporate governance of corporations that issue securities
    • Establish rules and practices for risk management
    • Set the rules and practices of the investment method
    • Establish rules and procedures for ensuring transparency for listed companies
    • Set the rules and procedures for short- selling, for resolving disputes, for sanctions and penalties.
    • Set the rules and procedures for listing and trading of financial instruments on stock exchanges or over the counter markets.
    • Sets the rules for issuing securities
    • Set the rules for the delisting of financial instruments (removal of instruments from the stock exchange).
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Personnel

This division currently has 6 people engaged, including the head of the division and other staff.

Division for Supervision of Financial Institutions IT Systems

With the growing reliance of financial institutions and financial services on IT systems and IT processing services, or related to technology and communication contracted by third parties, it is necessary to increase caution and supervision of financial institutions in terms of weaknesses and potential operational risks associated with the use of these systems.

 

The risks associated with these services can affect the profitability, liquidity, and own capital of financial institutions, as well as the financial system as a whole in cases where systemic institutions are impacted. The materialization of these risks can have a negative impact on the reputation of financial institutions and financial services in general, potentially jeopardizing the reputation and thus the financial sector’s stability. These risks can also cause the interruption of the provision of financial services, resulting in the weakening and fading of consumer confidence, particularly towards certain financial products and services, with the risk of losing faith in the financial system.

 

The rapid pace of technological advancements and changes creates new challenges, necessitating continuous monitoring of these developments as well as an assessment of their impact on the operations of financial institutions. Recognizing these risks as inseparable aspects of supervision, the examination of the adequacy of information systems and their management by financial institutions is essential. The Division for the Supervision of Financial Institutions’ Information Technology Systems will focus on the risks to which the institution is exposed, which are included in the framework of operational risk as defined by the CBK. These risks can have a negative impact on a financial institution’s financial results and the level of its capital.

 

CBK will intensify its activities towards the establishment of this important function for the supervision of financial institutions’ information technology systems, in order to ensure the adaptation of adequate risk management systems resulting from this field, as well as to build a system of early action and prevention of damages that may derive from these risks for the financial sector, through the adaptation of the best international practices.

 

Personnel
This Division will include the staff of (2) two people who are currently engaged within the ISD.