The EU report on Kosovo assesses the sustainability of the financial system


The Central Bank of the Republic of Kosovo has welcomed the report published for Kosovo by the European Commission, which recognizes the measures taken by the CBK in the continuous growth and sustainability of the financial sector.

The report estimated that in the first half of this year, loans recorded an increased of 17%. The increase in loans was facilitated by the low interest rates, the continuous increase in deposits, the improvement of the implementation of contracts and the increase in the guarantees given by the Kosovo Credit Guarantee Fund (KCGF) for lending to micro, small and medium enterprises in order to mitigate the impact of the crisis. Also, the average rate of non-performing loans in the first half of 2022 was 2.1% and this percentage was maintained thanks to the high growth of loans.

According to the report, Kosovo is moderately prepared in the field of financial services. Also, the Report assesses progress in addressing the issue of uninsured and unregistered vehicles.

The Central Bank of Kosovo has continued to harmonize its legal framework with Basel III requirements regarding capital and risk management.

The financial sector remains stable, despite global economic challenges due to high capitalization levels of the foreign-owned banking sector. In general, the banks' capitalization ratio remained stable and well above the minimum required level of capital adequacy of 12%.

The report also talks about the functionalization of the CBK Board with the appointment of 3 non-executive members, also emphasizing the necessity of maintaining the independence of the CBK.

The report also mentioned the non-establishment of an independent recovery and resolution authority, which depends on changes to be made to the Law on banks, through which this function is assigned to the Central Bank, and it must be ensured that the authority has functional independence within CBK.

Also, the Report includes developments in the insurance and pension sectors, as well as the ongoing implementation of Solvency I measures and the start of the gradual implementation of a 5-year roadmap for the implementation of Solvency II measures.

Regarding insurance and pensions, the Central Bank should enhance the supervisory role in the insurance industry. In relation to price liberalization in the compulsory insurance market, the Commission has requested that any process of price liberalization should be done in a gradual manner in order to avoid disruption to the market.

The European Commission has suggested that next year the legal framework of Kosovo needs to further align its legislation with the EU Payment Service Directive 2, the increase of efforts to fight economic and financial crime, and alignment of the Law on the Prevention of Money Laundering and Financing Terrorism with the acts (acquis) of the EU, then the strengthening of inter-institutional cooperation in the fight against economic and financial crime.

In relation to consumer protection, it is emphasized that the Division of Appeals of the Financial Services Users within the Central Bank handles most of the complaints regarding financial services.

Also, it is noted that progress has been made in collecting and reporting some data to Eurostat, however further efforts are needed to address methodological inconsistencies in national accounts. Monthly statistics on international trade in goods are reported to Eurostat. The Balance of Payments data are compiled by the Central Bank and are generally in compliance with the EU acquis.
The full report published by the European Commission in English can be found at the following link: