FINANCIAL STABILITY REPORT · CBK Working Paper no. 4 Efficiency of Banks in South-East Europe: With Special Reference to Kosovo . Financial Stability Report Number 11 | 1 BANKA QENDRORE

FINANCIAL STABILITY

REPORT

Number |11

July |2017

BANKA QENDRORE E REPUBLIKËS SË KOSOVËS

CENTRALNA BANKA REPUBLIKE KOSOVA

CENTRAL BANK OF THE REPUBLIC OF KOSOVO

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Efficiency of Banks in South-East Europe: With Special Reference to Kosovo CBK Working Paper no. 4

Number 11 Financial Stability Report

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BANKA QENDRORE E REPUBLIKËS SË KOSOVËS

CENTRALNA BANKA REPUBLIKE KOSOVA

CENTRAL BANK OF THE REPUBLIC OF KOSOVO

Financial Stability Report

Number 11

Financial Stability Report Number 11

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PUBLISHER ©Central Bank of the Republic of Kosovo

Economic Analysis and Financial Stability Department

Garibaldi 33, Prishtinë 10000

Tel: +38138 222 055

Fax: +38138 243 763

WEBSITE www.bqk-kos.org

E-mail [email protected]

EDITOR-IN-CHIEF Zana GJOCAJ

EDITOR Krenare MALOKU BAKIJA

AUTHORS Arta HASHIMI

Arta NUSHI

Bejtush KIÇMARI

Valon HASANAJ

TRANSLATOR and

TECHNICAL EDITOR Butrint BOJAJ

http://www.bqk-kos.org/

mailto:[email protected];


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ABBREVIATIONS

ATM Automated Teller Machines

CAR Capital Adequacy Ratio

CBK Central Bank of the Republic of Kosovo

CEE Central and Eastern Europe

CIS Commonwealth of Independent States

EBRD European Bank for Reconstruction and Developments

ECB Central European Bank

FDI Foreign Direct Investments

GDP Gross Domestic Product

HHI Herfindahl-Hirschman Index

IMF International Monetary Fund

KAS Kosovo Agency of Statistics

KPSF Kosovo Pension Savings Fund

MF Ministry of Finance

MFI Micro Financial Fnstitutions

MTA Money Transfer Agencies

NFA Net Foreign Assets

NIM Net Interest Margine

NPISH Non-profitable Institutions Serving Households

NPL Non-Performing Loans

ODC Other Depository Corporations

POS Point of sales

pp Percentage points

PTK Post and Telecommunication of Kosovo

RLI Rule of Law Index

ROAA Return on Average Assets

ROAE Return on Average Equity

ROE Return on Equity

RWA Risk Weighted Assets

SDR Special Drawing Rights

SEE Southeastern Europe

TPL Third Party Liability

VAT Value Added Tax

Note: Users of the data are required to cite the source.

Suggested citation: Central Bank of the Republic of Kosovo (2017),

Financial Stability Report No. 11 Prishtina: CBK

Any needed correction will be made in the electronic version.


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CONTENTS

1. Governor’s Foreword ------------------------------------------------------------------------------- 13

2. Summary ---------------------------------------------------------------------------------------------- 14

General assessments of risk to financial stability ----------------------------------------------- 18

Map of the financial stability ---------------------------------------------------------------------------------- 18

3. Euro area and Western Balkans ----------------------------------------------------------------- 20

4. Kosovo’s Economy ---------------------------------------------------------------------------------- 29

4.1. Securities Market ------------------------------------------------------------------------------------------ 32

5. Kosovo’s Financial System------------------------------------------------------------------------ 34

5.1. General Characteristics ---------------------------------------------------------------------------------- 34

5.2 Exposure to external sector ------------------------------------------------------------------------------ 35

6. Kosovo’s banking sector --------------------------------------------------------------------------- 38

6.1 Structure of the Banking Sector ------------------------------------------------------------------------ 38

6.2. Activity of the Banking Sector -------------------------------------------------------------------------- 38

6.3. Performance of the Banking Sector ------------------------------------------------------------------- 51

6.4 Risks of the banking sector ------------------------------------------------------------------------------ 54

6.5. Stress-test analysis --------------------------------------------------------------------------------------- 66

6.6. Financial infrastructure in Kosovo --------------------------------------------------------------------- 71

7. Pension Sector --------------------------------------------------------------------------------------- 74

8. Insurance Sector------------------------------------------------------------------------------------- 76

8.1. Activity of the Insurance Sector ------------------------------------------------------------------------ 76

8.2. Performance of the Insurance Sector ---------------------------------------------------------------- 77

9. Microfinance sector and Financial Auxiliaries------------------------------------------------- 79

9.1. Activity of Microfinance Sector ------------------------------------------------------------------------- 79

9.2. Performance of the Microfinance Sector ------------------------------------------------------------- 82

9.3. Financial Auxiliaries --------------------------------------------------------------------------------------- 83

10. Macroprudential Policy --------------------------------------------------------------------------- 84

10.1. Identification and assessment of systemic risk --------------------------------------------------- 84

10.2. Summary of developments in selected macroprudential indicators ------------------------- 85

10.3. Decisions and macroprudential CBK measures -------------------------------------------------- 86

10. STATISTICAL APPENDIX ----------------------------------------------------------------------- 87

11. References ---------------------------------------------------------------------------------------- 107


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LIST OF FIGURES ------------------------------------------------------------------------------------------------- 18

Figure 1. Map of the financial stability ------------------------------------------------------------------------- 18

Figure 2. Annual real GDP growth rate in euro area ------------------------------------------------------ 20

Figure 3. Inflation rate in euro area ---------------------------------------------------------------------------- 20

Figure 4. EURIBOR interbank lending and ECB refinancing rate -------------------------------------- 21

Figure 5. Profitability indicators of the banking sector in main euro area countries ---------------- 21

Figure 6. Annual credit growth and NPL rate in main euro area countries --------------------------- 22

Figure 7. Annual growth of loans and deposits in region countries ------------------------------------ 22

Figure 8. Euro exchange rate against major currencies -------------------------------------------------- 23

Figure 9. Structure of PCH assets ------------------------------------------------------------------------------ 23

Figure 10. Loans and deposits trend of PCH ---------------------------------------------------------------- 24

Figure 11. Effeciency indicators of PCH ---------------------------------------------------------------------- 25

Figure 12. Structure of RBI assets ----------------------------------------------------------------------------- 26

Figure 13. Loans and deposits trend of RBI ----------------------------------------------------------------- 26

Figure 14. Efficiency indicators of RBI ------------------------------------------------------------------------ 26

Figure 15. Structure of NLB Group assets ------------------------------------------------------------------- 27

Figure 16. Loans and deposits trend of NLB Group ------------------------------------------------------- 27

Figure 17. Efficiency indicators of NLB Group --------------------------------------------------------------- 28

Figure 18. Annual average change of CPI ------------------------------------------------------------------- 30

Figure 19. Exports, imports and trade balance -------------------------------------------------------------- 31

Figure 20. Remittances ------------------------------------------------------------------------------------------ 31

Figure 21. Structure o foreign direct investments by components -------------------------------------- 32

Figure 22. Securities market trend ----------------------------------------------------------------------------- 32

Figure 23. The announced and bidding amount ------------------------------------------------------------ 33

Figure 24. Structure of Government securities by maturity----------------------------------------------- 33

Figure 25. Average interest rate on Kosovo’s Government securities, by maturity ---------------- 33

Figure 26. Assets structure of financial system ------------------------------------------------------------- 34

Figure 27. Financial intermediation in Kosovo, by sectors ----------------------------------------------- 34

Figure 28. Loans to GDP ----------------------------------------------------------------------------------------- 35

Figure 29. Loans to GDP gap ----------------------------------------------------------------------------------- 35

Figure 30. NFA by financial sectors ---------------------------------------------------------------------------- 35

Figure 31. External exposure by financial sectors ---------------------------------------------------------- 36

Figure 32. Assets structure of external sector -------------------------------------------------------------- 36

Figure 33. Structure of external liabilities --------------------------------------------------------------------- 37

Figure 34. Structure of the banking sector assets ---------------------------------------------------------- 38

Figure 35. Concentration level in the banking sector ------------------------------------------------------ 38

Figure 36. Structure of the banking sector assets ---------------------------------------------------------- 38

Figure 37. Assets of the banking sector ---------------------------------------------------------------------- 39

Figure 38. Structure of securities ------------------------------------------------------------------------------- 39

Figure 39. Contribution of the sectors to total loans growth ---------------------------------------------- 40


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Figure 40. Structure of loans by sectors in region countries --------------------------------------------- 40

Figure 41. Structure of loans by economic activity --------------------------------------------------------- 40

Figure 42. Loans by economic activity ------------------------------------------------------------------------ 41

Figure 43. Structure of loans by maturity --------------------------------------------------------------------- 41

Figure 44. Structure of loans to enterprises and households, by maturity ---------------------------- 41

Figure 45. Total loans and new loans ------------------------------------------------------------------------- 42

Figure 46. New loans ---------------------------------------------------------------------------------------------- 42

Figure 47. New loans by sectors -------------------------------------------------------------------------------- 42

Figure 48. New loans by sectors and purpose of use ----------------------------------------------------- 42

Figure 49. Bank’s credit standards applied in assessing enterprise applications ------------------- 43

Figure 50. Terms and conditions applied for loans to enterprises -------------------------------------- 44

Figure 51. Enterprise demand for loans ---------------------------------------------------------------------- 44

Figure 52. Bank’s credit standards applied in assessing household applications ------------------ 45

Figure 53. Terms and conditions applied for loans to households ------------------------------------- 45

Figure 54. Household demand for loans ---------------------------------------------------------------------- 46

Figure 55. Structure of banking sector deposits ------------------------------------------------------------ 47

Figure 56. Structure of enterprise deposits ------------------------------------------------------------------ 47

Figure 57. Nonresident deposits -------------------------------------------------------------------------------- 47

Figure 58. Structure of deposits by maturity ----------------------------------------------------------------- 48

Figure 59. Structure of time deposits -------------------------------------------------------------------------- 48

Figure 60. Average interest rate -------------------------------------------------------------------------------- 48

Figure 61. Interest rates in Kosovo and in region countries ---------------------------------------------- 48

Figure 62. Average interest rate on loans to enterprises and households --------------------------- 49

Figure 63. Average interest rates on loans to enterprises, by purpose ------------------------------- 49

Figure 64. Average interest rates on loans to enterprises, by maturity -------------------------------- 49

Figure 65. Average interest rates on loans to enterprises, by economic activity-------------------- 49

Figure 66. Average interest rate on loans to households, by purpose -------------------------------- 50

Figure 67. Average interest rate on deposits ---------------------------------------------------------------- 50

Figure 68. Average interest rate on enterprise deposits -------------------------------------------------- 50

Figure 69. Average interest rate on household deposits -------------------------------------------------- 50

Figure 70. Financial performance of the banking sector -------------------------------------------------- 51

Figure 71. Income structure of the banking sector --------------------------------------------------------- 51

Figure 72. Banking sector expenses --------------------------------------------------------------------------- 51

Figure 73. Value of banking sector expenses --------------------------------------------------------------- 52

Figure 74. Profitability indicators of the banking sector --------------------------------------------------- 52

Figure 75. Expenses-to-income ratio -------------------------------------------------------------------------- 53

Figure 76. Loans and deposits of the banking sector ------------------------------------------------------ 55

Figure 77. Total liquid assets to short-term liabilities ------------------------------------------------------ 55

Figure 78. Banking sector reserves ---------------------------------------------------------------------------- 55

Figure 79. Liquidity gap ------------------------------------------------------------------------------------------- 55


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Figure 80. NPL to total loans ratio ------------------------------------------------------------------------------ 56

Figure 81. Total loans and NPL --------------------------------------------------------------------------------- 57

Figure 82. NPL to total loans ratio in Kosovo and in certain Western Balkan countries ---------- 57

Figure 83. NPL rate by economic activity --------------------------------------------------------------------- 57

Figure 84. Structure of loans by classification --------------------------------------------------------------- 57

Figure 85. NPL and provisions ---------------------------------------------------------------------------------- 58

Figure 86. Concentration and credit risk ---------------------------------------------------------------------- 58

Figure 87. Banking sector capitalization ---------------------------------------------------------------------- 59

Figure 88. Regulator capital and RWAs ---------------------------------------------------------------------- 59

Figure 89. CAR in the banking sector in Kosovo and in the region countries ----------------------- 59

Figure 90. Structure of regulatory capital --------------------------------------------------------------------- 60

Figure 91. Structure of Tier 1 capital --------------------------------------------------------------------------- 60

Figure 92. Structure of Tier 2 capital --------------------------------------------------------------------------- 60

Figure 93. RWAs to total assets ratio of the sector -------------------------------------------------------- 60

Figure 94. RWA structure by risk weight ---------------------------------------------------------------------- 61

Figure 95. Opened positions in foreign currencies to Tier 1 capital ------------------------------------ 61

Figure 96. Loans and deposits in foreign currency --------------------------------------------------------- 62

Figure 97. Assets and liabilities gap sensite to interest rates -------------------------------------------- 63

Figure 98. General scale of systemic importance ---------------------------------------------------------- 64

Figure 99. Criteria of size ----------------------------------------------------------------------------------------- 64

Figure 100. Criteria of substitutability -------------------------------------------------------------------------- 65

Figure 101. Interconnectedness criteria ---------------------------------------------------------------------- 65

Figure 102. Criteria of interstate activity and complexity -------------------------------------------------- 66

Figure 103. Assets of pension sector -------------------------------------------------------------------------- 74

Figure 104. Contributions collected by pension funds ----------------------------------------------------- 74

Figure 105. Structure of pension sector investments ------------------------------------------------------ 74

Figure 106. Financial performance of Kosovo Pension Saving Fund ---------------------------------- 75

Figure 107. Financial performance of Slovenian-Kosovo Pension Fund ----------------------------- 75

Figure 108. Structure of assets of insurance sector ------------------------------------------------------- 76

Figure 109. Assets of insurance sector ----------------------------------------------------------------------- 76

Figure 110. Premiums received and claims paid ----------------------------------------------------------- 76

Figure 111. Collected gross premiums ------------------------------------------------------------------------ 77

Figure 112. Claims paid ------------------------------------------------------------------------------------------- 77

Figure 113. Assets of microfinance sector ------------------------------------------------------------------- 79

Figure 114. Structure of assets of microfinance sector --------------------------------------------------- 79

Figure 115. Loans to households, by maturity--------------------------------------------------------------- 80

Figure 116. Structure of loans to enterprises ---------------------------------------------------------------- 80

Figure 117. Growth rate of loans to enterprises ------------------------------------------------------------- 80

Figure 118. Loans to enterprises, by maturity --------------------------------------------------------------- 80

Figure 119. Microfinance sector leasing ---------------------------------------------------------------------- 81


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Figure 120. Structure of leasing --------------------------------------------------------------------------------- 81

Figure 121. Average interest rate on microfinance sector loans ---------------------------------------- 81

Figure 122. Average interest rate on loans, by economic sectors -------------------------------------- 81

Figure 123. Microfinance sector income and expenses --------------------------------------------------- 82

Figure 124. Profitability indicators of microfinance sector ------------------------------------------------ 82

Figure 125. Credit portfolio quality indicators of microfinance sector ---------------------------------- 82

LIST OF TABLES -------------------------------------------------------------------------------------------------- 35

Table 1. Number of financial institutions ---------------------------------------------------------------------- 35

Table 2. Assets structure of the banking sectors ----------------------------------------------------------- 39

Table 3. Structure of liabilities and own resources of the banking sector ----------------------------- 46

Table 4. The key efficiency indicators of the banking sector --------------------------------------------- 53

Table 5. Capacity Indicators of the banking sector --------------------------------------------------------- 53

Table 6. Risk indicators of the banking sector --------------------------------------------------------------- 54

Table 7. Indicators used to assess systemic importance of banks in Kosovo ----------------------- 64

Table 8. Summary of stress-test results: credit risk -------------------------------------------------------- 68

Table 9. Summary of stress-test results: liquidity risk ----------------------------------------------------- 70

Table 10. The share of payment instruments to total IPS transactions ------------------------------- 72

Table 11. Banking sector network ------------------------------------------------------------------------------ 72

Table 12. The share of card transactions value by terminals to total value of card transactions.73

Table 13. Structure of the pension sector -------------------------------------------------------------------- 74

LIST of BOXES

Box 1. Performance of the largest banking groups operating in Kosovo ----------------------------- 23

Box 2. Identification of banks with systemic importance in Kosovo ------------------------------------ 63


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1. Governor’s Foreword

Global economy during 2016 was characterized by more favorable developments, where a quite

important contribution was given by euro area economy. Quantitative easing measures taken by

European Central Bank strengthened the domestic demand, which represented the main

incentive of the economic growth. Developments in the euro area had a positive reflection on the

Western Balkans, which in general reported an increase of domestic demand and of imports.

Weak inflationary pressures in euro area continued to be present also in 2016, mainly as a

consequence of low oil prices, and metals and energy prices in international markets. These

developments were reflected also in the economy of Western Balkans, where were marked low

inflation rates.

Kosovo’s economy, similar to the developments in the euro area and in the region countries, were

characterized with an economic growth of activity in 2016. The growth of consumption and

investments represent the factor with the main contribution, while the high rate of trade deficit

continued to have negative impact on the economic growth of the country. Kosovo continued to

have macroeconomic stability. Inflation rate stood at quite low level, while the fiscal position

remained sustainable with low rate of budget deficit and public debt.

Kosovo continues to have a sound financial system, which represents a very important source of

financial stability and economic growth in the country. All the constituent sectors of the financial

system marked an activity increase, thus offering to the economy a more diverse financial

products. The financial intermediary activity of the banking sector marked a steady growth. The

financing conditions of banks continued to mark a recovery, where besides the decrease of

interest rates, the access to bank loans was associated with other eased conditions. The recovery

of lending conditions and the consistent development of new financial product, being supported

also by the good soundness of Kosovo’s banking sector, was reflected to the continuous growth

rate of financial intermediation in Kosovo. Financial soundness indicators of the Kosovo’s

banking sector represent a quite satisfactory statement, where it is worth noting the further

decline of nonperforming loans and credit portfolio quality, by which especially Kosovo is

characterized compared to other region countries. Also, the banking sector continued to have

high liquidity level and low exposure to market risk. Pension sector marked an increase of assets

being supported by the increase of new pension collections and the considerable increase of

return on investments. Insurance sector marked an activity increase as well, albeit the financial

performance of the sector continued to be unfavorable. Microfinance institutions continued to

accelerate lending activity, thus substantially enriching the credit products offered in Kosovo.

The infrastructure of the banking sector continued to enhance, thus increasing the efficiency of

financial services. In 2016, it was marked the beginning of the functioning of the new interbank

payment system, namely ATS, which highly contributes in enhancing the process of payments.

Also, the increase of points of sales and e-banking accounts, had an impact on the growth of the

volume and the value of realized transactions.

The Central Bank of the Republic of Kosovo (CBK) remains committed in implementing its legal

objectives, where the financial stability continued to represent the primary goal. The financial

stability assessment and providing the public continuously with the important financial stability

developments will continue to be among the main priorities of the CBK.

Bedri HAMZA

Governor


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2. Summary

The economic activity in euro area was characterized with a steady increase in 2016, mainly

being supported by domestic demand. The average of the annual real GDP growth rate in euro

area in 2016 was 1.8 percent, mainly being supported by improvement of financing conditions in

euro area, the consistent improvements of conditions in the labor markets, low prices of oil and

energy. At the same time, Western Balkan countries were characterized with an average

increase of GDP with around 2.8 percent, mainly being supported by exports and increase of

investments .

Euro area was characterized with weak inflationary pressures in 2016, where the average

inflation rate was around 0.2 percent. In December 2016, the ECB decided to continue with

quantitative easing program until the end of 2017, aiming at bringing back the inflation rate

near the target of 2 percent and recovering the economic activity. However, the impact of

expansion monetary policies on the price level in euro area resulted to be limited in 2016, mainly

as a consequence of low prices of oil and the decline of energy prices in this period. Similarly to

the euro area, the Western Balkan countries were characterized with weak average inflationary

pressures of 0.2 percent, mainly being attributed to price developments in international markets.

Mainly supported by eased monetary policy, lending activity in euro area was recovered in two

recent years, where in 2016 the average lending increase was 2.4 percent. Also, profitability

indicators and the key financial soundness indicators marked a recovery in 2016 compared to the

previous year. The main euro area countries were characterized with a satisfactory liquidity level

of the banking sector, and with improvement of credit portfolio quality in the reporting period.

Similar to euro area countries, lending in Western Balkans marked an increase in 2016, mainly

as a result of the the improved lending conditions of banks and the increase of credit demand.

Also, profitability and the key financial soundness indicators marked a recovery in 2016

compared to the previous year.

Kosovo’s economy was characterized with an activity growth in 2016 compared to the previous

year. Based on the preliminary statistics on the quarter GDP published by the Kosovo Agency of

Statistics, results that Kosovo’s economy marked an average increase of 3.4 percent throughout

the four quarters of 2016, while the nominal value of GDP reached EUR 5.98 billion. The

increase of the economic activity was mainly generated by the domestic demand, namely the

increase of investments (10.4 percent) and consumption (2.9 percent). During 2016, the real

growth of Kosovo’s economy was supported by the increase of the activities of agriculture sector,

trade and financial activities, whereas a real decline was assessed to have been marked by real

estate business, processing industry and public administration. For 2017, CBK estimates suggest

that the real GDP growth rate will reach 3.7 percent.

Kosovo’s economy in 2016 was characterized with a slight increase of price level compared to the

previous year, where the annual average of inflation rate, expressed through the consumer price

index, was 0.3 percent. Kosovo continues to have sustainable fiscal position. In 2016, Kosovo’s

budget recorded a primary budget deficit of EUR 61.1 million, compared to the budget deficit of

around EUR 111.4 million in 2015. Public debt reached EUR 852.7 million, while as a percentage

to GDP, public debt reached 14.5 percent in 2016.

While the added value from manufacturing sectors in the country remained low, the increase of

the domestic demand lead to a further increase of current import, thus having an impact on the

growth of trade deficit. Current and capital account deficit reached the value of EUR 534.6

million (EUR 471.4 million in 2015), mainly due to the increase of the deficit in goods account

and the decrease marked in the positive balance of primary income account. Conversely, positive


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balances of services and secondary income account marked an increase. During 2016, Kosovo’s

external sector was characterized with an annual increase of remittances received in the country

with 3.8 percent, the value of which amounted to EUR 691.0 million. Conversely, Foreign Direct

Investments (FDI) received in Kosovo reached the value of EUR 215.9 million in 2016,

representing a decline compared to the previous year’s amount of EUR 308.8 million. During this

period, a decline of FDI was marked almost by all the sectors, albeit a more significant decrease

was marked by real estate and financial services sectors.

Kosovo’s financial sector was characterized with a steady increase of activity in all its constituent

sectors during 2016. Consequently, financial intermediary rate in Kosovo, expressed as a ratio of

financial system assets to GDP, reached 90.0 percent from 84.5 percent as it was in the previous

year. Loans of the banking sector, as the main contributor to assets growth of the financial

system, were characterized with an accelerated annual increase of 10.4 percent (7.3 percent in

2015), thus reaching the value of EUR 2.23 billion. The increase of lending is attributable to the

increase of lending to enterprises which dominate the structure of total loans, and the

accelerated growth pace of lending to households. The improvement of lending conditions by

banks and the increase of demand for loans were the main contributors to the increase of lending

activity of banks. In this context, a positive impact may have had also the launch of Kosovar

Fund for Guaranteeing loans which took place in 2016. Lending of the banking sector to GDP

ratio stood at 37.1 percent in 2016, representing a low ratio compared to the average of the region

countries (around 56 percent). Also, the lending gap to GDP, which shows the current ratio of

loans to GDP along with its long-term potential, continued to stand at a negative territory for

Kosovo suggesting a further increase of financial intermediation in the country. In 2016, with

annual accelerated increase of lending was characterized trade sector, while manufacturing

sector marked a slowdown annual increase. The sectors which were characterized with an annual

decline of lending were agriculture, financial services and real estate services. Loans with longer

term of maturities continued to increase their share to total loans, which may be attributed to

the increase of demand for loans with longer term of maturities and the improvement of credit

supply offered by banks through lengthening the maturity of the loans.

The main source of financing the activity of the banking sector continued to be presented by

deposits, which in 2016 reached the value of EUR 2.90 billion marking an annual increase of 7.2

percent. The main contributor to the increase of total deposits were household deposits, which

are considered to be a steady source of financing compared to other channels.

The average interest rates of loans continued to mark a declining trend also in 2016, while the

average interest rates on deposits registered an increase for the second consecutive year.

Interest rates on loans decreased to 7.2 percent, while the average interest rate on deposits

increased to 1.2 percent. Interest rates on loans and deposits in Kosovo’s banking sector

approximately stand at the same level of the average interest rates of the region countries.

Financial sector continued to be characterized with high stability, being assessed by the level of

performance and financial soundness indicators. The profit realized in 2016 reached an amount

of EUR 75.5 million, representing a decline compared to the previous year which was

characterized with the highest profit of the sector ever realized. However, the profitability

indicators such as Return on Average Assets (ROAA) and Return on Equity (ROE) stood at high

level, reaching 2.3 and 19.7 percent respectively, representing a significant higher level

compared to region countries. Liquidity position of the banking sector continued to be at a steady

level, despite the accelerated increase of lending which had an impact on the increase of loans to

deposits ratio at 77.0 percent. Liquid assets to short-term liabilities ratio stood at 41.5 percent,

which is quite higher than the obligatory required level of 25 percent. Capitalization position of

the sector continued to reflect sustainability and high capability of the banking sector to cope


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with any potential losses. Capitalization indicator declined at 17.9 percent as a result of the

decrease of Tier 2 capital, but the quality of regulatory capital continued with an increase for the

third consecutive year as a result of the increase of the Tier 1 capital being supported by the

profit gained through the previous years. Consequently, the share of Tier 1 capital to total

regulatory capital in December 2016 reached 88.7 percent from 87.7 percent as it was in the

previous year.

The exposure to credit risk has continued to decline, being reflected by further decrease of

nonperforming loans to total loans ratio at 4.9 percent, representing the lowest level since 2010.

The decline of nonperforming loans to total loans ratio was impacted by higher increase of loans

and their significant quality improvement. As regards to economic sectors, the NPL rate of loans

to households was 2.5 percent while for loans to enterprises this rate stood at 5.5 percent. Along

with the increase of credit portfolio quality, it was also marked an increasing rate of loan loss

provisions rising at 127.6 percent, which indicates a satisfactory coverage level of the sector with

loan losses. The NPL rate to total loans ratio continued to be at lower levels compared to the

region countries where this rate stood at 14.2 percent in December 2016.

The exposure to credit risk continued to be low. The ratio of net aggregated opened position in

foreign currency to Tier 1 capital increased to 4.6 percent, albeit standing significantly at lower

level than the required highest level of 30 percent. Loans in foreign currencies marked a decline,

thus further reducing their low share at 0.2 percent. Loans and deposits are affected by interest

rate movements primarily only in maturity given their fixed interest rates. The negative gap for

the short-term maturity “up to 30 days” narrowed compared to the previous year, which

decreases the exposure of banking sector to the risk of possible increase of interest rates.

Whereas, the cumulative gap up to 1 year was doubled, hence increasing the exposure to possible

decline of interest rates.

Banks have created a system, policies and appropriate procedures for managing the operational

risk. This risk was appropriately managed also in 2016, not having cases of its materialization,

and possessing the needed capital to cover this risk in compliance with the regulatory

requirements.

Results of stress-test analysis as of the end-year data suggest a high capability of the banking

sector to face any possible shocks to credit portfolio quality and to the level of capitalization,

which may occur as a result of some hypothetic scenarios such as: the increase of NPL rate,

depreciation of EUR against major currencies, the decrease of assets interest rates and the

increase of liabilities interest rates, and the failure of the largest borrowers. Moreover, the

banking sector has showed an ability to maintain the liquidity position under hypothetic

assumptions of deposits considerable withdrawals.

The banking infrastructure during 2016 continued to be enhanced and expanded at the same

time. An important enhancement was marked in the field of the payment system by

implementing an entirely new interbank payment system, namely Automate Transfer System

(ATS). This system enables fund transfers at real time and processing of payments in group and

in small amounts. Number and value of processed transactions by ATS in 2016 marked a

significant increase with 17.9 and 42.5 percent, respectively. The number of bank accounts with

a slight annual decline of 0.6 percent, while e-banking accounts registered an increase of 23.3

percent. With an increase were also characterized credit and debit cards as well, whose number

marked an increase of 17.5 percent. The POS network recorded an increase in 2016, whereas the

ATM number declined. Despite the decline of ATMs number, the number and value of

transactions processed through them increased. All these developments suggest for an efficiency

increase of banking services.


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Other constituent sectors of financial system, such as pension sector, insurance and microfinance

sectors, were also characterized with an increased activity. Assets of the pension sector marked

an annual increase of 15.2 percent reaching a value of EUR 1.43 billion in December 2016.

Annual financial performance of the sector marked an increase as well, as a result of the increase

of price share and almost by doubling their return on investments. Insurance sector expanded

its activity by increasing assets at EUR 161.8 million, corresponding to an annual increase of 5.9

percent. However, the financial performance of the sector continued to remain unsatisfactory as a

result of the deepened loss marked during this year. The deepening of the loss was mainly a

result of the actuarial revaluation of technical provisions of some insurance companies providing

“non-life insurance” which had underestimated technical provisions for unpaid claims submitted

in the previous years. A significant contribution in deepening the loss was given by insurance

companies expenses, which had marked a considerable annual increase. Microfinance sector

marked the highest increase of assets in the financial system during this year. The value of

assets of the sector reached EUR 142.2 million in December 2016, corresponding to an annual

increase of 23.7 percent. Also, the performance of this sector was improved compared to three

previous years, as a result of the significant increase of the profit which reflected in an

improvement of profitability indicators.

In order to maintain the stability of financial system, in 2016, the Central Bank of the Republic

of Kosovo has drafted The Policy on Macroprudential Supervision. This policy defines the

activities, objectives and needed instruments for Macroprudential Supervision, in order to

maintain financial stability, by reducing the accumulation of systemic risk and strengthening the

resistance of financial system. In the second half of 2016, the general developments of

macroprudential indicators in Kosovo were sustainable, with no threat to financial stability of

the country.


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General assessments of risk to financial stability

Map of the financial stability

The end-2016 was characterized with a

slight increase of the risk for internal

risk indicators such as capitalization

and profitability, liquidity and

financing, and the structure of the

banking sector (figure 1).1 Risk to

financial stability from external and

internal macroeconomic environment

marked an increase as well. Whereas,

the risk from economic agents, such as

enterprises and households has marked

a decline. The government sector

remained with the same risk grade.

Finally, the most of the indicators continued to stand quite lower than the historic average risk

level.

The oil price increase in the international markets and the lower economic growth of the main

Kosovo’s treading partners in the fourth quarter of 20162 compared to the same period of the

previous year has had an impact on the increase of the external macroeconomic environment

risk. Conversely, key interest rates and unemployment in the last quarter of 2016 marked a

slight decline, mitigating the risk increase from the external sector. Despite of the fact that the

risk from the external economy has marked an increase, it still remains at quite low levels of the

historic average.

Lower real economic growth rate in Q4 2016 compared to Q4 2015 had an impact on the output

gap in this period to be negative, suggesting that the economy has had a performance under its

potential of effectively utilizing the resources. Therefore, the negative gap, along with the

average quarter inflation increase, has led to an increase of the risk that comes from the

domestic macroeconomic environment. The external debt to GDP ratio marked an increase,

consequently slightly contributing to the increase of the risk. Whereas, the current account

balance to GDP narrowed in Q4 2016 and the real effective exchange rate of EUR against the

currencies of the trading partners marked an increase, thus contributing to the risk decline. The

risk level from domestic macroeconomic environment continued to stand above the historic

average level, primarily due to the structural deepening of current account deficit to GDP, or

because of its higher ratio compared to its historic tendency.

The risk that comes from the economic agents, namely households and enterprises, has marked a

significant decline in Q4 2016, mainly attributing to lending increase to these sectors which

resulted to positive gap of lending. The improvement of credit quality in both of the sectors had

an impact also on the risk decline. A pronounced contribution to the risk decline of households

was marked by remittances, which marked an annual increase in Q4 2016 compared to Q4 2015

when they had marked a decline. Enterprises registered a risk decline in all other components,

1 Developments of the key risk indicators to Kosovo’s Financial Stability are depicted in the figure of The Map of the Kosovo’s Financial Stability. This Map graphically

represents the movement of the risk level by main risk categories to financial stability and enables the comparison with the historic average grade of the risk for the

appropriate categories. The increase of the distance from the center of the map for the indicators reflects an increase of the risk and reduction of the ability to face

possible shocks to financial stability and vice versa. The entire methodology of the model of Kosovo’s Financial Stability Map, including the recent reviews, is presented in

The CBK Working Paper No. 6. 2 Economic growth is weighed with Kosovo’s exports weight in the appropriate countries. A more significant impact on the indicator’s decline in this period was marked by

the weight decline of exports to India, which has the highest rate of the economic growth among all the trading partners.

0

2

4

6

8

10External economy

Domestic economy

Households

Enterprises

Government

Banking sectorstructure

Capitalization andprofitability

Liquidity andfinancing

Source: CBK (2017)

Historic average 2015 Q4 2016 Q4

Figure 1. Financial stability map


| 19

as industrial turnover index, added value in GDP from trade sector, net balance of registered

businesses and in confidence sub-indicator of the business which reflects the business

expectations for business activity. The risk from the government sector has remained the same.

Main developments convey the increase of fiscal deficit in Q4 2016 which lead to a rise of the risk

grade, but which was neutralized from the risk decline as a result of lower public debt

expenditures in this period compared to the previous year.

Internal debt for the banking sector, associated to the structure of the banking sector and to the

level of capitalization an profitability has marked a slight increase. The main development that

had an impact in risk increase from the structure of the banking sector was the higher decline of

certain banks capitalization rate compared to the average decline of the whole banking sector,

which affected on the increase of the negative deviation of the average capitalization rate of the

banking sector. The concentration of assets of the three largest banks has also marked a slight

increase, hence rising the risk of this category, whereas other components as the concentration of

credit borrowings from businesses, diversification of credit portfolio and sources of financing the

banks have marked improvements, and consequently contributing to the risk decline.

Risk associated to capitalization and profitability marked an increase in Q4 2016 primarily

reflecting the profit decline prior to taxes compared to the previous year. Capitalization rate of

the sector has declined in Q4 2016 as a consequence of the decline of Tier 2 capital. Interest

income and large exposures gave a contribution to the growth of the risk as well, while the

improvement of credit portfolio was the only component that had a positive impact on the risk

level of this category.

Internal risk linked to liquidity and financing of the sector marked an increase, reflecting loans

to deposits ratio which increased as a result of accelerated credit growth. Liquid assets to short-

term liabilities has declined and the gap of assets to liabilities for the maturity term up to 3

months increased, having an impact on the increase of the risk. Whereas, to the risk decline a

contribution was given by the accelerated increase of household deposits and the decline of

liabilities to nonresidents ratio to total liabilities.

Despite of the slight increase of the financial stability risk associated to internal indicators which

assess the capacity of the sector to face external shocks, it should be emphasized that liquidity

position and capitalization of the sector remained satisfactory relying on the level of the main

liquidity and capitalization parameters which stand at a quite more favorable levels than the

referenced rate and the minimum required level by the regulation.3

3 Liquid assets to short-term liabilities in Q4 2016 was 41.5 percent compared to the minimum required level of 25 percent. Loans to deposits ratio stood at 77.0 percent,

and the capital adequacy ratio was 17.9 percent, representing a quite higher level than the 12 percent as it is required.


20 |

3. Euro area and Western Balkans

Euro area

Euro area was characterized with a

steady economic growth in 2016, despite

the challenges with which was faced as

the gradual increase of the global

economy, geopolitical tensions and

terrorist attacks. The real annual

average of GDP growth rate of euro area

in 2016 was 1.8 percent, compared to

the average rate of 2.0 percent marked

in the previous year (figure 2). The

expansion policies and non-conventional

measures taken by the ECB within the

quantitative easing program have had a

positive impact on financial conditions

in euro area. Moreover, the continuous improvement of conditions in the labor markets, the

generation of new vacancies, low prices of oil and energy have been translated in an increase of

disposable income, thus having an impact on the increase of private domestic consumption. In

2016, investments position in euro area was recovered with a slower pace compared to

consumption, where uncertainties about the impact that Brexit might have, elections in some EU

countries, and the possible impact from presidential elections in USA may have had an impact on

businesses confidence in euro area.

The growth of the economic activity

remained concentrated in the central

euro area economies, namely in

Germany, France and Spain, while other

countries continued to be characterized

with a sluggish economic growth. ECB

forecasts suggest that the real GDP

growth rate in 2017 is expected to reach

steady levels with a rate of 1.8 percent.

Domestic consumption, as one of the

incentive factors of the economic growth

is expected to mark a slowdown in the

upcoming year as a consequence of the

price increase, albeit is going to be

supported by quantitative easing program and the continuous improvement in labor market

conditions.

The inflation rate in euro area continued to remain under the ECB target. In 2016, the average

inflation rate was 0.2 percent. In December 2016, ECB decided to continue with the quantitative

easing program at least until end-2017, with the primary aim of returning the inflation rate

closer to the target of 2 percent. However, the impact of expansionary monetary policies on the

price level in euro area resulted to be limited in 2016, mainly as a consequence of low prices of oil

and the decline of energy prices in this period. However, the ECB projections for 2017, suggest

that the average inflation rate in euro area is expected to increase up to 1.7 percent (figure 3),

mainly as a result of price increase of main commodities in international markets, especially

energy prices.

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

2012 2013 2014 2015 2016

Source: Eurostat (2017)

Figure 2. Annual real GDP growth rate in euro area

1.3

0.4

0.0

0.2

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

2013 2014 2015 2016

Source: Eurostat (2017)

Figure 3. Inflation rate in euro area, in percent


| 21

The launch of comprehensive stimulus

program since March 2016 has had an

impact on the decline of 1-month and

12-month interest rates of interbank

Euribor lending. The ECB has continued

to keep the interest rate on main

refinancing operations at zero percent

(figure 4).

Euro area was characterized with a

recovery of lending activity in two recent

years. Favorable monetary policy has

stimulated an expansion of lending

activity. Until the end of the year,

lending in euro area was characterized with an average growth rate of 2.4 percent (2.0 percent

until December 2015). The increase of lending was more pronounced in Germany (4.2 percent)

and France (2.9 percent), whereas in countries as Greece, Austria and Spain, the increased rate

of lending remained at a negative territory (figure 5). During this period, also the total value of

deposits marked an average increase of 0.5 percent (1.0 percent in 2015), where a higher increase

was marked by Italy (3.8 percent). A slower increase of deposits was marked by Germany (0.9

percent), whereas France and Greece was characterized with a decline of 0.3 percent and 3.0

percent, respectively.

Profitability indicators, as Return on

Average Assets (ROAA) and Return on

Average Equity (ROAE), at an average

marked an increase. Greece which in the

previous year was characterized with a

fragile level of profitability, this year

marked an improvement realizing a

positive return on the average of the

capital and assets (figure 5).

An increase was marked also by main

financial soundness indicators. The

average level of capitalization of the

banking sector, expressed through the

regulatory capital ratio to risk weighted assets, increased at an average of 19.5 percent from 19.2

percent as it was in the previous year. Higher increase of capitalization level was marked by

Austria (18.0 percent) and Greece (16.9 percent), as a result of the improvement of profitability

level. In this period, the capitalization level in Germany, France and Spain stood at the same

level as in the previous year with around 18.3, 17.2 and 14.8 percent, respectively. Whereas, the

level of using the capital in financing the financial activity in the euro area countries, measured

by financial leverage, marked a slight decline at an average of 8.1 percent from 8.4 percent in

2015.

Credit portfolio quality marked an improvement in main euro area economies, where the level of

NPL decreased at an average of 7.4 percent from 9.0 percent. Almost all countries were

characterized with a decline of nonperforming loans. The lowest level of NPL, in the countries

with a rate was above the average level of lending in euro area, is held by Germany with 2.3

percent and the Netherlands with a rate of 2.5 percent (figure 6).

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

Mar

Jun

Sep

De

c

Ma

r

Jun

Sep

De

c

Ma

r

Jun

Sep

De

c

Ma

r

Jun

Sep

Dec

Ma

r

Jun

Sep

De

c

2012 2013 2014 2015 2016

Source: Euribor (2017) and ECB (2017)

1m 12m ECB refinancing rate, (right axis)

Figure 4. EURIBOR interbank lending and ECB refinancing rate

0%

1%

2%

3%

4%

5%

6%

7%

8%

Germany* France* Italy* Austria Spain Greece

Return on Average Assets (ROAA) Return on Average Equity (ROAE)

* Data as of Q3

Source: IMF (2017)

Figure 5. Profitability indicators of the banking sector in main euro area countries in 2016


22 |

Main euro area countries were

characterized with a satisfactory

capitalization level of the banking sector,

albeit at an average, euro area marked a

slight decline of this indicator. In

December 2016, the average level of

liquid assets to short-term liabilities fell

to 75.0 percent, from 78.1 percent as it

was in 2015. The Netherlands and

Germany4 stand at the highest level of

liquidity, where liquid assets exceed

short-term liabilities for 167.0 percent

and 145.6 percent, respectively.

Western Balkans

The economic performance of the

Western Balkans continued to

strengthen. The increased demand in the

euro area, as the main trading partner

for the Western Balkan countries, was

translated in position improvement of

net exports of the region. The

improvement of the position of net

exports and the increase of investments

has resulted in an average increase of

GDP in Western Balkans of 2.8 percent

in 2016 (3.0 percent in 2015). With an

accelerated economic increase was

characterize Albania and Serbia, while

other Western Balkan countries marked an economic slowdown compared to the previous year.

For the year 2017, IMF has forecasted an average increase of GDP of 3.3 percent in the Western

Balkans.

Similarly to the euro area, the Western Balkan countries were characterized with weak

inflationary pressures, mainly being attributed to price developments in international markets.

In 2016, Western Balkan countries were characterized with an average inflation rate of 0.2 and

(0.4 percent in 2015), while IMF has forecasted an increase of inflation rate of 1.7 percent in

2017.

In 2016, lending in the region marked an increase, mainly being supported by eased credit supply

of banks, and the increase of credit demand. The highest increase of lending was marked by

Kosovo (10.4 percent), being followed by Serbia (6.1 percent), and Albania (2.5 percent). Banking

sector in the region countries was characterized also by an increase of the general level of

deposits, where the highest annual increase was registered in Serbia (11.5 percent) and

Montenegro (9.4 percent) (figure 7).

Also the main financial soundness indicators in 2016 were characterized with a positive trend,

marking a slight increase compared to previous year.

4 The latest available data are as of September 2016.

4.2% 2.9%0.2% -0.1%

-2.9%-6.2%

2.3%3.9%

17.5%

2.7%5.6%

36.3%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Germany France Italy Austria Spain Greece

Source: IMF (2017)

Annual credit growth NPL

Figure 6. Annual credit growth and NPL rate in main euro area countries in 2016

0%

2%

4%

6%

8%

10%

12%

14%

Kosovo Albania Macedonia Serbia Montenegro BH

Source: Central banks of respective countries (2017)

Loans Deposits

Figure 7. Annual growth of loans and deposits in the region countries, in 2016


| 23

Profitability indicators, expressed as a ratio of Return on Average Equity (ROAE) and Return on

Average Assets (ROAA), marked an annual increase in the most region countries, except Albania.

Also, in 2016, the credit portfolio quality improved, where the average NPL rate decreased at

around 13.5 percent (16.0 percent in 2015). The lowest level of NPL was marked in Kosovo (4.9

percent) and in Macedonia (7.1 percent), while the highest level of 18.3 percent was marked by

Albania.

In 2016, the average of the regulatory capital to risk weighted assets ratio increased to 17.3

percent (16.7 percent in 2015). Whereas, the financial leverage marked a slight average increase

at 13.8 percent from 13.7 percent as it was in 2015.

Also the liquidity position, expressed as

a ratio of liquidity position to total

short-term liabilities stood at high

levels, increasing at an average of 45.4

percent in 2016 from 45.0 percent as it

was in the previous year.

ECB decisions not to change interest

rates after the recent changes in March

2016 were reflected in strengthening

EUR currency against the major

currencies (figure 8). Until December,

EUR slightly depreciated against US

dollar, whereas it was appreciated

against other major currencies such as British pound and Swiss franc. During this period EUR

exchange rate against the US dollar was depreciated with 0.1 percent, while against the Swiss

franc and British pound was appreciated with an average of 2.2 and 12.0 percent, respectively.

Within the currencies of the region countries, EUR appreciated against Macedonian denar and

Serbian dinar with 0.01 and 2.0 percent, respectively, while it was depreciated against Albanian

lek with an average of 1.7 percent.

Box 1. Performance of the largest banking groups operating in Kosovo5

ProCredit Holding – PCH (Germany)

The value of total assets of the banking

group ProCredit Holding (PCH) reached

EUR 5.7 billion in 2016, representing annual

decline of 5.7 percent. The decline of assets

was mainly a consequence of selling of

subsidiaries in Bolivia and Mexico. In

accordance with regional activities, assets

structure of the group is concentrated in

Southeastern Europe, which comprises 50.0

percent of total assets of the group. The

second most important segment is Germany

with 21.5 percent of total assets of the group,

followed by Eastern Europe and Southern

America with a share of 15.3 percent and 6.8

percent, respectively. The remainder of

assets is comprised by subsidiaries which are in process of closure (figure 9). For PCH, Kosovo is one of the

5

According to annual reports published by ProCredit Holding, Raiffeisen Bank International, and Nova Lubljanska Banka.

50.0%

15.3%6.8%

21.5%

Source: ProCredit Holding (2017)

Southeastern Europe Eastern Europe Southern America Germany

Figure 9. Structure of PCH assets, in percent

2013 2014 2015 2016

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Source: CBK (2017)

US dollar British pound Swiss franc

Figure 8. EUR exchange rate against major currencies


24 |

most important countries because it comprises around 14.1 percent of total assets of the group. In 2016, the

group closed subsidiaries in Bolivia and Mexico as a consequence of not realizing profit. The closure of these

two subsidiaries was reflected in an increase of Tier 1 capital of the group. PCH is in the process of

restructuring its business model. One of the strategic plan of the group is the restructuring of the key

clients, thus shifting the portfolio from small enterprises to large ones and to those which have potential to

contribute to economic developments and creating new vacancies, where this transition phase was planed to

end in 2017. Also, in two recent years, PCH has stimulated to increase the usage of electronic

banking, thus enabling to decline the number of bank affiliates. PCH showed a progress in 2016 by

improving credit quality and efficiency, measures that were needed to generate income when low interest

rates dominate the market. Being successful in doing business, PCH in December 2016 listed for the first

time its shares at Frankfurt Stock Exchange, with an initial price of EUR 12.29 per share, whereas at the

end of the first trading day the final price reached EUR 13.01.

The group is committed to expand its credit

portfolio for the amounts exceeding the

referenced value of EUR 30 thousands

defined by the group. At the end of 2016,

total loans of PCH reached a value of EUR

3.6 billion, which represent an annual

increase of 2.4 percent if the subsidiaries in

Bolivia and Mexico are not included.

However the increase did not match group

management's expectations, as a result of the

sale of subsidiaries and the reduction of

portfolios below the value of EUR 30

thousands (figure 10). In recent years, PCH

has changed its investment strategy, by

focusing towards lending to enterprises

rather than lending to households. In December 2016, out of total loans, 90.9 percent account for loans to

enterprises whereas loans to households comprise the remainder mainly intended for purchase and

furnishing of real estate. In 2016, PCH reached an agreement with European Investment Bank for the

guaranteeing scheme of loans to SMEs, in the region of Eastern and Southeastern Europe.

Similar to loans, also the value of deposits reached EUR 3.5 billion, corresponding to an annual decline of

8.4 percent, albeit if the subsidiaries that were sold were excluded, the value of deposits would be

characterized with an increase of 6.2 percent. Saving deposits marked a more significant increase, while

time deposits marked a decline (figure 10).

The group realized a very good financial year, despite unfavorable economic conditions. The profit realized

reached EUR 61.0 million, which was close to the level of the previous year’s profit of EUR 61.3 million.

This result affected the Return on Average Equity which was lower than in the previous year (9.6 percent in

2016 compared to 10.5 percent in 2015 (figure 11). Lower realized profit was mainly attributed to total

operational income for 2.1 percent. Low interest rates on the global level, and the strategic plan of the group

to withdraw from credit lines under the value of EUR 30 thousands, have resulted in a decline of interest

income for 11.3 percent in 2016. Consequently, also net interest income marked a decline of 11.5 percent

(EUR 29.9 million in 2016).

However, the decline of interest income was compensated to some extent with the reduction of operational

and provision expenses, as a result of the improvement of credit quality. The improvement of credit quality

had an impact on net loan loss provisions to decline at EUR 18.6 million, from EUR 42.1 million in 2015.

Operational expenses marked a decline of 6.3 percent, mainly as a result of the decline of 10.6 percent of

personnel expenses.

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

2012 2013 2014 2015 2016*

*Including closed subsidiaries in Bolivia and Mexcio


Loans Deposits

Figure 10. Loans and deposits trend of PCH, in

percent


| 25

The increase of shareholders capital and the

decline of total risk weighted assets, had an

impact on regulatory capital of the group to

reach 15.7 percent in 2016, from 12.1 percent

as it was in 2015 (figure 11). Also, the high

level of liquidity of the group mainly is

attributed to regulatory requirements of the

countries where the group operates.

The performance of the group is influenced

by the macroeconomic developments and

conditions in financial markets in the

countries where it operates, where these

factors which have an impact on clients

behaviors. The Southeastern Europe

(including Kosovo), where PCH has concentrated the majority of its assets, in 2016 was characterized with

an increase of economic activity, mainly as a result of increased demand in euro area. The region of Eastern

Europe is expected to remain challenging, being impacted by potential conflict effects between Russia and

Ukraine, albeit Ukraine already faced with an economic decline of 9.9 percent in 2015, whereas in 2016

marked an economic increase of 1.5 percent. Within this region, also Moldavia and Georgia marked an

economic increase of 2.0 percent and 3.4 percent, respectively, in 2016, where the Southern America’s

Trade, which is comprised by subsidiaries in Ecuador and Columbia, is expected to be impacted by

developments in the market of oil prices. In 2016, these countries were characterized with an economic

decline of 2.3 percent in Ecuador (an increase of 0.3 percent in 2015) whereas Columbia marked an

acceleration of its economic activity of 2.2 percent (3.1 percent in 2015), mainly as a consequence of low

prices of oil, and of the earthquake which happened in 2016 in Ecuador.

In 2016, Germany’s economy grew by 2 percent, representing a better economic performance compared to

some other European countries. As a result of the monetary expansionary policy, the interest margin

narrowed further, which will continue to represent a challenge in itself for the banking sector in generating

net interest income.

Raiffeisen Bank International – RBI (Austria)

The value of total assets of the banking group

Raiffeisen Bank International (RBI) declined

to EUR 111.9 billion in 2016, representing an

annual decline of 2.2 percent. The reduction

of RBI assets primarily was impacted by the

selling of the leasing company in Poland and

of a subsidiary in Slovenia. Based on the

regional context, Austria has the leading

position in assets structure, representing 27.3

percent of total assets of the group, followed

by Central Europe as another quite important

market which represents around 26.4 percent

of total assets of the group. Southeast Europe

with 20.3 percent is listed as the third region

by importance, being followed by East Europe which represents 13.7 percent of total assets of the group.

The remainder accounts for assets of some subsidiaries in Poland, Asia and America, which were planned to

be reduced or sold (figure 12). Raiffeisen bank which operates in Kosovo continued to have quite low share

of 0.8 percent to total assets of RBI. Central European region in 2016 was characterized with a weaker

economic increase of 2.7 percent. Despite of being positively impacted by the economic growth of Germany,

from the economic recovery in the euro area and affected also by the monetary expansionary policy in some

of the Central European countries, the economic growth rate in this region stood below the previous year’s

level which was 3.5 percent. Within the countries of Southeast Europe the economy of Serbia and Croatia

had an impact on the accelerated economic activity which characterized the whole region. The economic

26.4%

20.3%

13.7%

27.3%

12.4%

Source: Raiffeisen Bank International (2017)

Central Europe Southeastern Europe Eastern Europe RBI Group (Austria) Other

Figure 12. Structure of RBI assets, in percent

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2012 2013 2014 2015 2016


Expenses to income ratio ROAE (right axis) CAR (right axis)

Figure 11. Effeciency indicators of PCH, in percent


26 |

activity in the region of Eastern Europe marked an improvement, primarily being supported by Russia,

which had positive economic developments due to price increases of gas. Austria's economy in 2016

marked a moderated economic increase, reaching a rate of 1.5 percent, mainly as a result of the

increase of domestic demand (an increase of private consumption which was inclined by reforms

of tax system) and by investments in construction.

Credit portfolio of RBI marked an increase of

0.8 percent in 2016, reaching EUR 70.5

billion, an increase wich is mainly attributed

to the increase of lending to households. The

increase of lending was more pronounced in

Russia, Czech Republic and Slovakia.

Whereas, lending to SMEs marked a decline,

which was mainly a consequence of the

selling of a leasing subsidiary in Poland. The

value of deposits in 2016 reached EUR 71.5

billion, thus marking an annual increase of

3.7 percent. This increase was a result of the

growth of household deposits, especially in

Czech Republic, Russia, Slovakia and

Romania. SMEs deposits marked an increase

as well, whereas corporation deposits marked a decline, mainly in the RBI HQ Office and in Poland and

Slovakia. As a consequence of the higher increase of deposits, loans to deposits ratio declined to 98.6 percent

from 101.3 percent in 2015 (figure 13).

Due to the low level of interest rates, RBI faced a decline of operational income, albeit net profit was

positively affected by a significant decline of provision expenses. Expenditures to income ratio of RBI

increased to 60.7 percent in 2016, from 59.1 percent in the previous year, as a consequence of a more

pronounced decline of operational income (figure 14). The decline of 4.8 percent of total operational income

was affected mainly by the decline of 11.8 percent of net interest income, which is primarily attributed to

significant currency movements (depreciation of currency in Eastern Europe), and low interest rates in

many countries where the banking group operates and high liquidity level in the market. The decline of

operational expenses for 2.3 percent is mainly attributed to depreciation of the currency in East Europe, and

the decline of commissions for deposits insurance. The decline of other administrative expenses which

contributed to the decline of total administrative expenses was mainly a result of the closure of some

affiliates.

In 2016, loan loss provision expenses

declined to 40.3 percent on annual basis, or

for EUR 509.4 million. The reduction of

provisions was a result of the selling of

nonperforming collateral loans and

improvement of credit assessment of

corporation clients. The reduction of loan

loss provision expenses was more pronounced

in Ukraine, Asia, HQ office and Hungary.

Consequently, the decline of provision

expenses had an impact on RBI to close the

year with a net profit with a value of EUR

463.1 million, compared to the profit of EUR

378.8 million realized in 2015.

The profit realized in 2016 affected the improvement of Return on Average Equity (ROAE) to 10.3 percent,

from 8.5 percent as it was in 2015. Capital Adequacy Ratio (CAR) in 2016 stood at 19.2 percent, compared to

17.4 percent as it was in 2015, which still remains quite above the minimal level required by the regulation

(figure 14). The improvement of credit risk resulted from the decline of nonperforming loans for EUR 1.8

billion. Consequently, nonperforming loans to total loans ratio decreased to 9.2 percent, from 11.9 percent as

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

2012 2013 2014 2015 2016


Loans (annual change) Deposits (annual change)

Figure 13. Loans and deposits trend of RBI, in

percent

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2013 2014 2015 2016


Expenditures to income ratio ROAE (right axis) CAR (right axis)

Figure 14. Efficiency indicators of RBI, in percent


| 27

it was in 2015. Also, as a result of the decline of nonperforming loans, the coverage of nonperforming loans

with provisions reached 75.6 percent from 71.3 percent as it was in 2015. At the end of 2016, RBI has

approved merging with Raiffeisen Zentralbank Österreich AG (RZB). This decision had an impact on RBI

shares which are listed in Vienna stock exchange to have a significantly better performance. The RBI price

per share in Vienna stock exchange in the last day of 2016 increased to EUR 17.38, compared to EUR 13.61

as it was in the last day of 2015.

Economic developments in the countries where RBI operates, are expected to have a positive impact on the

performance of the group. Central Europe which was characterized with a weak economic growth, in 2017 it

is expected to recover as a result of monetary expansionary policies, investments increase and the increase

of consumption of households. Similarly, economies of Southeast Europe are expected to have an accelerated

pace of economic growth in 2017. The Eastern Europe economy is facing a difficulty in the growth, due to

the lack of incentive internal and external factors. Russia’s economy is expected to be supported by positive

trend of oil prices, while Ukraine and Belarus are expected to be characterized with an economic shrinkage

in 2017. In 2017, the economy of Austria is expected to continue with a recovery of its activity, supported

mainly by domestic demand (private consumption and capital investments), and by a better performance of

exports compared to 2016.

Nova Ljublanska Banka- NLB (Slovenia)

NLB banking group was characterized with

an increase of its activity in 2016 compared

to the previous year. The value of total assets

of the group reached 12.0 billion,

representing an annual increase of 1.8

percent. Regarding the group’s regional

activities, Slovenia, which is also the origin

of NLB group, represents the main market

with around 69.7 percent of total assets of

the group. In Southeastern Europe where the

group has a more pronounced presence, the

majority of assets of the group is invested in

Macedonia followed by Bosnia, whereas in

Western Europe the share of the group is

very low consisting of 0.4 percent of total

assets of the group (figure 15). The NLB

bank which operates in Kosovo, in December

2016, had a share of 4.3 percent to total

assets of the group.

NLB group continued to be characterized

with a decline of lending activity in 2016,

albeit with a slower pace compared to the

previous year. The value of total loans was

EUR 7.9 billion, representing an annual

decline of 5.4 percent. Whereas, deposits

were characterized by an annual growth of

4.6 percent, whose value reached an amount

of EUR 9.4 billion in 2016 (figure 16). The

significant decline of loans, alongside with

the increase of deposits, had an impact on

loans to deposits ratio to decrease to 83.7 percent in 2016 from 92.5 percent as it was in 2015.

NLB group in 2016 marked a decline of expenditures to income ratio at 60.9 percent from 61.6 percent as it

was in 2016, as a result of the higher decline of expenditures compared to the decline that was marked by

income (figure 17).

69.7%

29.9%

0.4%

Source: Nova Ljubljanska Banka (2017)

Slovenia Southeastern Europe Western Europe

Figure 15. Structure of NLB group assets, in percent

-20%

-15%

-10%

-5%

0%

5%

10%

2012 2013 2014 2015 2012


Loans (annual change) Deposits (annual change)

Figure 16. Loans and deposits trend of NLB group, in percent


28 |

The decline of operational income was lead by the decline of 6.7 percent marked by net interest income,

which primarily resulted from the investments of the Bank of Slovenia in international markets which

currently are facing low interest rates. As a result of such an environment, NLB group aimed to better

manage interest expenses by repricing some of financing sources in compliance with the current rates of

return on investments in the market. Also, after ECB set negative rates on deposits , NLB group has taken

a decision to apply negative rates on large deposits of corporations in Slovenia. Being under the focus of the

management, expenditures marked an annual decline of 2.8 percent in 2016, especially administrative

expenses which decreased for 7.3 percent.

Despite low interest rates in financial markets, high level of liquidity surplus and high competition in the

market for bringing investment projects, NLB group managed to realize a profit of EUR 110 million or 19.7

percent higher than in 2015, as a result of the increase of new loans in some subsidiaries and better

management of expenditures. The main

contributors to the profit growth were the

bank of Slovenia and some banks in

Southeastern Europe. This result was

reflected also in the rate of ROAE, which

improved at 7.4 percent from 6.6 percent as it

was in 2015.

CAR in 2016 increased to 17.0 percent, from

16.2 percent as it was in 2015, despite the

dividends payments during the year (figure

17). Positive trend was marked also in credit

portfolio quality, where nonperforming loans

to total loans ratio decreased considerably at

13.8 percent from 19.3 percent in 2015, as a

result of the substantial improvement of the

structure of credit portfolio. The NPL coverage with provisions, in 2016, was 64.6 percent compared to the

rate of 62.8 percent in 2015.

Economic developments in the countries where NLB operates, are expected to have a positive impact on the

performance of the group. Slovenia continued to have a steady economic growth also in 2016. Exporting

sectors were characterized with a significant improvement. Along with the good performance of trade

activity, domestic demand is expected to strengthen in the following year. The sector of construction

remains a supporting factor for the economic growth of the country. Whereas on one of the main challenges

of the banking sector in Slovenia will be generating of income, while the fierce competition in the banking

market of Slovenia was reflected in a continuous decline of interest rates.

-160%

-140%

-120%

-100%

-80%

-60%

-40%

-20%

0%

20%

40%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2013 2014 2015 2016


Expenditures to income ratio ROAE (right axis) CAR (right axis)

Figure 17. Efficiency indicators of NLB Group, in percent


| 29

4. Kosovo’s Economy

Kosovo’s economy was characterized with an activity growth in 2016 compared to the previous

year. Based on the preliminary statistics of the Kosovo Agency of Statistics for the quarter GDP,

Kosovo’s economy marked an average increase of 3.4 percent during the four quarters of 2016,

while the nominal value of GDP reached EUR 5.98 billion.

The increase of the economic activity was mainly generated by the domestic demand, namely the

increase of investments (10.4 percent) and consumption (2.9 percent). The factors which have had

an impact on the increase of the domestic demand among others are the increase of bank lending

(10.4 percent), the increase of public investments (9.8 percent), the increase of incoming transfer

flows in the form of remittances from abroad (3.8 percent) and the increase of expenditures of the

public sector on wages and salaries (3.6 percent). Net exports are considered to have been

characterized with a considerable deepening of trade deficit in this period (8.0 percent). The

increase of trade deficit is attributed to the increase of 5.6 percent of import of goods and

services, while the export of goods and services marked an increase of only 2.4 percent.

In terms of the structure, GDP by expenditures approach is dominated by consumption, which in

2016 had a share of 101.3 percent to total GDP. Conversely, the investments share to GDP

remained around 28 percent, while the net component of exports continued to have negative

share to GDP with a rate of 28.8 percent. As regards the manufacturing approach, the structure

of GDP in Kosovo is dominated by services sector, which has a share of 50.3 percent to total

structure of GDP, followed by public administration (12.5 percent), trade and agriculture sector

(12.4 percent and 10.7 percent to total structure of GDP). Considerable share to GDP have also

the sectors of the processing industry (10.3 percent) and the real estate business (8.2 percent). In

2016, the real economic growth was supported mainly by the increased activity of agriculture

sector (7.6 percent), trade (4.8 percent) and financial activities (12.4 percent). Whereas, the real

decline is estimated to have been marked by business with real estate (1.5 percent), processing

industry (1.1 percent) and public administration (0.4 percent).

Based on the CBK estimates, Kosovo’s economy in 2017 is expected to mark a real growth of 3.7

percent. In 2017, the main contributors to the growth are expected to be investments, which are

forecasted to mark a real growth of 6.8 percent, based on the projections for a considerable

increase of public investments (16.9 percent) and private investments (3.3 percent). An important

contribution to investments increase is expected to be marked by bank lending, which is expected

to be characterized with an accelerated growth pace and low interest rates. Also FDI is expected

to give a contribution to the increase of general investments position, which in the previous year

marked a considerable increase. Also, the changes in tax policy in the previous years are

expected to boost private investments.

Consumption, as the main component of domestic demand, is expected to mark a real increase of

2.1 percent, based on expectations that private consumption will increase by 2.4 percent and

public consumption by 0.6 percent. Factors which are expected to have an impact on the increase

of private consumption growth, among others, are also the increase of remittances and loans.

Until the end of 2017, remittances are expected to mark an annual growth of 2.8 percent. Also,

loans to households, which in the recent years marked a considerable increase (an average

annual increase of 12 percent in the last three years), are expected to continue with the same

trend also in 2017. Net exports of goods and services are expected to have a lower negative

contribution to GDP compared to previous year, an assumption that relies mainly on forecasts on

the increase of metal prices which are expected to have an impact on the increase of the value of

total exports.


30 |

Kosovo’s economy in 2016 was characterized with a slight increase of the price level compared to

previous year. The average annual inflation rate, expressed through the Consumer Price Index

(CPI), was 0.3 percent (figure 18). Prices of alcoholic beverages and tobacco marked an annual

increase of 8.1 percent, followed by footwear and clothing with 2.7 percent. Conversely, a price

decline was marked mainly by electricity, gas and other fuels (2.3 percent) and transport services

(1.9 percent). With a decline of 0.1 percent were characterized also food prices, which represent

around 33.9 percent of the Kosovar consumer basket.

Developments in the fiscal sector, during

2016, show an increase of the budget

revenues and expenditures. Budget

revenues6 in 2016 reached a net value of

EUR 1.60 billion, representing an

annual increase of 9.6 percent, while

budget expenditures7 reached the value

of EUR 1.66 billion, representing an

annual increase of 5.7 percent.

Consequently, Kosovo’s budget recorded

a primary budget balance of EUR 61.1

million in 2016, compared to the budget

deficit of EUR 111.4 million in 2015.

Regarding the type of taxes, it was

observed a higher increase of direct tax revenues which reached a value of EUR 232.1 million (an

increase of 17.4 percent), followed by indirect tax revenues which reached a value of EUR 1.2

billion (an increase of 11.2 percent), while non-tax revenues marked a decline of 8.3 percent

reaching a value of EUR 175.3 million. Regarding expenditures, almost all categories were

characterized with an increase except goods and services which marked a decline. Government

expenditures on wages and salaries marked an increase of 3.6 percent and reached a value of

EUR 543.7 million. Subsidies and transfers also marked an increase of 13.5 percent, reaching the

value of EUR 474.7 million. Capital investments, which represent around 26.8 percent of total

budget expenditures, marked an increase of 9.8 percent and reached the value of EUR 443.6

million. Government expenditures on goods and services (including also the municipal utilities)

marked a decrease of 1.3 percent and reached a value of EUR 202.8 million.

Public debt reached EUR 852.7 which is for 13.9 percent higher compared to the previous year,

whereas as a percentage to GDP, public debt reached 14.5 percent from 13.0 percent as it was in

2015. This increase in public debt is mainly attributed to the growth of domestic debt of 26.8

percent (which reached EUR 479.0 million), while the external public debt increased slightly with

0.7 percent, reaching EUR 373.8 million. The share of public external debt to total domestic debt

decreased to 43.8 percent from 59.6 percent as it was in 2015.

Kosovo’s economy was characterized with a dis-balance in the external sector, due to the low

added value from the manufacturing sector and the increase of domestic demand. The increase of

consumption and investments in 2016 has had an impact on the imports growth in the country,

which has been translated into a deficit increase of the current account. The deficit of current

and capital account reached a value of EUR 534.6 million, compared to the deficit of EUR 471.4

million in the previous year, mainly due to the increase of the deficit in goods account and the

6

Within the primary income were not included the revenues from borrowings, income from privatization, receipts of donor defined grants and receipts from deposits in

trust. 7

Within budget expenditures are not included debt payments, membership payments at International Financial Organizations (IFO), and returns from deposit funds.

(3.0) - 3.0 6.0 9.0

Total CPI

Transport

Housing, water, electricity, gas

Food and non-alc. beverages

Recreation and culture

Communication means

Education

Restaurants and hotels

Goods and different servi.

Furn. and household equipment

Health

footwear and clothing

Alcoholic beverages and tobacco

Figure 18. Annual average change of CPI, in percent

Source: KAS (2017)


| 31

decrease marked in the positive balance of primary income. Conversely, positive balances of

services and secondary income account marked an increase.

The trade deficit of goods reached the

value of EUR 2.5 billion, corresponding

with an annual increase of 7.4 percent

(figure 19). In 2016, the export of goods

value reached EUR 309.7 million,

representing an annual decline of 4.8

percent. The decline of the value of goods

exports during this period primarily was

attributed to the decline of base metals

export, which have the highest share to

the structure of total exports of the

country (around 35.9 percent). The

decline of the total exports value of base

metals came as a result of the decrease

of nickel production in the country, and due to the price decline of metals in international

markets. With a decline were characterized also the exports of textile and articles of it, and the

export of machinery and electrical equipment. Conversely, exports of mineral products marked

an increase, mainly as a result of the increased value of export of electricity. Also, the exports of

plastic and rubber products, and beverages and tobacco products marked an increase.

The value of total goods of the group reached EUR 2.8 billion, representing an annual increase of

5.9 percent. In the context of imported goods, with an increase were characterized the import of

transport means, machinery and mechanical equipment, products of plastic and rubber, prepared

foodstuff, etc. The decline of exports value and the increase of the imported value resulted in the

decline of the coverage rate of imports by exports at 11.1 percent (12.3 percent in 2015).

The balance in trade of services marked

a value of EUR 565.0 million,

representing an increase of 23.6 percent

compared to the previous year. The

value of exported services marked an

annual increase of 9.1 percent, reaching

EUR 1.0 billion. On the other hand, the

value of imported services marked a

decline of 4.3 percent and reached EUR

473.4 million. Within services export,

travel and transport services were

characterized with an annual increase of

12.4 percent and 6.6 percent,

respectively, while the category of

computer, information and telecommunication services marked a decline 11.6 percent. Regarding

the imported services, two main categories of services, namely transport and travel services,

marked a decline of 15.1 percent and an increase 4.2 percent, respectively.

The primary income account reached the value of EUR 80.9 million, representing a decline of

12.6 percent. The balance of income from the compensation of employees marked an increase of

5.6 percent, while the balance of income realized from investments declined for 1.6 percent.

Conversely, the secondary income account reached the value of EUR 1.1 billion, representing an

annual growth of 3.2 percent. This increase of secondary income mainly is attributed to the

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

2013 2014 2015 20136

Source: KAS (2017)

Import Trade balance Export

Figure 19. Exports, imports and trade balance, in millions of EUR

11.0%

8.5%

6.9%

3.8%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

2013 2014 2015 2016

0

100

200

300

400

500

600

700

Source: CBK (2017)

Remittances in millions of EUR (right axis) Change, in percent

Figure 20. Remittances


32 |

higher level of remittances received in Kosovo, which reached an amount of EUR 691.0 million,

representing an annual increase of 3.8 percent (figure 20).

Foreign Direct Investments (FDI)

received in Kosovo reached the value of

EUR 215.9 million, representing a lower

level compared to the value of EUR

308.8 million recorded in the same

period of 2015. Within the structure of

FDI, with a value decline were

characterized two forms of FDI, capital

and fund of investment in shares and

investments in debt instruments. The

capital and investments fund in shares,

which comprises around 85.3 percent of

total FDI, marked a value of EUR 179.0

million which is for 21.5 percent lower

compared to the same period of the previous year. Also, FDI in the form of debt instruments

marked a value of EUR 36.9 million which is for 54.3 percent lower compared to 2015 (figure 21).

FDI in Kosovo are mainly focused in the economic sectors as real estate, construction, financial

services and trade. In 2016, a decline of FDI was registered in all of the sectors. A more

pronounced decline was marked by real estate sector and financial services sector, which were

characterized with an annual decline of 11.6 percent and 70.5 percent, respectively. Regarding

the origin of FDI, Switzerland represents the country from where came the majority of FDI in

2016 (EUR 61.8 million), followed by Turkey with EUR 44.4 million, Albania with EUR 28.6

million, Germany EUR 25.7 million, etc.

In 2016, Kosovo’s external debt (the private and public external debt), reached euro 2.0 billion,

which is for 5.9 percent higher than in the previous year. As a percentage to GDP, the gross

external debt reached 34.2 percent. The public external debt reached a value of EUR 373.8

million, with a share of 18.3 percent to total external debt. In the structure of external debt,

World Bank has a share of 10.1 percent, followed by the IMF with a share of 9.0 percent, and

other creditors (more than half of the debt to other creditors is inter company borrowing) which

have a significant share of 80.9 percent.

4.1. Securities Market

Securities market of Kosovo’s

Government since the start of its

operation has shown a positive growth

trend and development. The volume of

auctions of securities has marked an

increase during this five-year period,

which was supported by the supply and

demand side as well. In 2016, the

number of auctions realized declined to

19 from 21 as they were in the previous

year, albeit the amount issued marked an increase (figure 22). The total amount issued, in 2016,

reached EUR 420.00 million, following the amount of EUR 398.55 million in the previous year.

Moreover, since 2014, when it was marked the beginning of the government bonds issuance, the

-30

20

70

120

170

220

270

320

370

2013 2014 2015 2016

Source: CBK (2017)

Capital and fund of investment in shares Debt instruments

Figure 21. Structure o foreign direct investments by components, in millions of EUR

0

5

10

15

20

25

0

50

100

150

200

250

300

350

400

450

2013 2014 2015 2016

In m

illi

on

s o

f E

UR

The amount offered (received) by the GovernmentNumber of auctions (right axis)Average period until maturity, monthly (right axis)

Figure 22. Securities market trend

Source: CBK (2017)


| 33

maturity has been lengthened. In the end of 2016, the average maturity term of securities

extended to 23.0 months, compared to

19.7 months in 2015 and 13.5 months in

2014.8

Investments in securities are considered

as attractive instruments and secure for

banks and other financial institutions.

This is reflected through the offered

amount by bidding entities, which in

each auction the bidding amount

exceeded the amount offered by the

government. The offered amount to

announced amount ratio, in 2016, was

2.17 (1.55 in 2015). Also, the announced

amount at auctions was for 3.7 percent

higher compared to 2015, while the

amount of bidding entities marked an

increase of 44.5 percent (figure 23).

Structure of issued securities is

dominated by treasury bills, which have

a share of 61.9 percent to total issuances

in 2016 (72.4 percent in 2015).

However, issuances in the form of

treasury bonds (instruments with a

maturity over 2 years) marked an

increase in 2016, reaching a share of

38.1 percent of the total issued amount

compared to 30.1 percent as it was in the

previous year (figure 24). The overall

average interest rate on securities

declined to 0.79 percent, compared to

1.94 percent in the previous year, thus

reflecting the bidding to offering amount

ratio at the auctions. The decline of the

interest rate is mainly attributable to

the increase of competition in the

market for investment on securities of

Kosovo’s Government,as a product that

brought favorable returns when interest

rates in external markets are low, and

when the liquidity position in Kosovo’s

banking sector is assessed to stand at

quite high level. The highest interest rate of 2.5 percent was recorded in treasury bonds with a

maturity of 5 years, while the lowest interest rate of 0.2 percent was recorded in treasury bills

with a maturity of 91 days (figure 25). All the categories of securities have lower interest rates

compared to previous year, where 5-year treasury bonds were characterized with a more

pronounced annual decline of the interest rate. This development was especially favored by the

8

The average maturity was calculated as a simple average of maturity term of securities which have not yet matured at the end of the period mentioned in the analysis.

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

0

50

100

150

200

250

300

350

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2012 2013 2014 2015 2016

In m

illio

ns o

f E

UR

Source: CBK (2017)

The announced amount by MF

The biding amounts by participants

The bidding/announced amount ratio (right axis)

Figure 23. The announced and bidding amount, in millions of EUR.

34.1%

13.0% 10.0% 9.5%

48.0%

38.6%

22.2%14.3%

17.8%

35.3%

37.6%

38.1%

13.1%

18.8%20.2%

7.5%9.5%

3.8% 8.3%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2013 2014 2015 2016

91 days 182 days 364 days 2 years 3 years 5 years

Figure 24. Structure of Government securities by maturity, in percent

Source: CBK (2017)

0.6%

1.3%

2.0%

0.6%

1.3%

1.7%

2.8%

0.6%

1.6%

1.6%

2.8%3.1%

4.9%

0.2% 0.2%

0.5%0.8%

1.6%

2.5%

0.0%

0.6%

1.1%

1.7%

2.2%

2.8%

3.3%

3.9%

4.4%

5.0%

5.5%

3M

6M

12

M

3M

6M

12

M 2Y

3M

6M

12

M 2Y

3Y

5Y

3M

6M

12

M 2Y

3Y

5Y

2013 2014 2015 2016

Figure 25. Average interest rate on Kosovo’s Government securities, by maturity

Source: CBK (2017)


34 |

amount bid for investment in this instrument which was twice higher compared to the amount

offered by the government.

5. Kosovo’s Financial System

5.1. General Characteristics

Kosovo’s financial system has continued

to be characterized with a steady

increase. In 2016, total assets value of

the system reached EUR 5.38 billion,

representing an annual increase of 9.8

percent. The increase was mainly a

result of the expansion of the banking

sector activity and positive performance

of pension funds. Microfinance and

insurance sectors also contributed to the

increase of total assets of the system,

albeit with a lower rate, while the sector

of financial auxiliaries continued to have

low weight within the financial system

in the country.

The structure of Kosovo’s financial

system remained dominated by the

banking sector, while the continuous

assets increase of pension funds was

reflected in an increase of the share of

this sector to total assets of the financial

system (figure 26). The share of other

financial sectors remained

approximately unchanged from the

previous years.

The intermediation financial rate in

Kosovo, calculated as a ratio of financial

system assets to Gross Domestic Product (GDP), increased during this period. In 2016, the

financial intermediation rate reached around 90.0 percent, compared to 84.5 percent in the

previous year (figure 27). While, as regards to lending activity of the banking sector, lending to

GDP ratio stood at 37.1 percent in 2016, representing a low ratio compared to the average of the

region countries (around 56 percent) (figure 28).

The gap of loans to GDP, which shows the current ratio of loans to GDP, along with its long-term

potential, in 2016 continued to stand at a negative territory for Kosovo (figure 29).

As a consequence, lending to GDP ratio and the gap indicator of lending suggest a further

increase of financial intermediation in the country. However, the continuous growth of lending in

the country, with a more accelerated pace in the recent years, has had an impact on Kosovo to

move towards the region countries. Moreover, the accelerated pace of lending activity may have

an impact in deterioration of the credit portfolio in a mid-term period, if it is not followed by the

accelerated increase of the economic activity in the country and a more proactive approach of

69.0%

3.1%

2.4%

0.2%

25.2%

2015.

Banks

Insurances

Microfinance

67.5%

3.0%

2.8%

0.2%

26.5%

2016.

Banks Insurances

Microfinance Financial auxiliaries

Pensions

Figure 26. Assets structure of financial system

Source: CBK (2017)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

FinancialSystem

Banking Sector Pension Sector InsuranceSector

Microfinancesector

Source: CBK (2017)

2013 2014 2015 2016

Figure 27. Financial intermediation in Kosovo, by sectors


| 35

banks to diversify the structure of lending towards the sectors with lower rate of borrowing and

which have a strategic importance for the economy of the country.

Regarding the number of financial institutions which comprise the financial system, the situation

remains almost the same with the previous year. Four new institutions were added to the sector

of financial auxiliaries, increasing their number to 48, whereas the number of microfinance

institutions and non-bank financial institutions decreased to 16 as a result of merging of two

financial institutions into one. Consequently, in 2016, the number of total licensed financial

institutions operating in the country reached 91 (table 1).

Table 1. Number of financial institutions9

Source: CBK (2017)

5.2 Exposure to external sector10

The value of net foreign assets (NFA) of

Kosovo’s financial system in 2016

reached EUR 2.5 billion, representing

an annual increase of 3.1 percent.

Foreign assets comprised 45.0 percent of

total assets of financial system (46.6

percent in 2015) while external

liabilities accounted for 7.9 percent of

total liabilities of the system (8.2

percent in 2015).

NFA of pension funds represent the

largest share of total NFA of financial

system (52.0 percent), followed by NFA of the CBK (34.5 percent of NFA of financial system). To

9 Number of financial institutions represents the institutions which are licensed to operate in Kosovo. Within the category of microfinance institutions were included five

financial non-bank institutions licensed for lending activity. 10

In this context, financial system includes the Central Bank of the Republic of Kosovo.

0

0.2

0.4

0.6

0.8

1

1.2

Figure 28. Loans to GDP

BH Kosovo Montenegro

Macedonia Serbia Albania

Region average

Source: IMF, Central Regional Banks (2017)

-0.1

-0.06

-0.02

0.02

0.06

0.1

0.14

0.18

Figure 29. Loans to GDP gap

BH Kosovo Montenegro

Macedonia Serbia Albania

Region average

Source: IMF, Central Regional Banks (2017)

Description 2013 2014 2015 2016

Commercial banks 9 10 10 10

Insurance companies 13 14 15 15

Pension funds 2 2 2 2

Financial auxiliaries 39 42 44 48

Microfinance institutions and non-bank financial institutions 17 18 18 16

-100

400

900

1,400

1,900

2,400

2,900

2013 2014 2015 2016

In m

illio

ns o

f E

UR

CBK Pension Sector Banking Sector

Microfinance Sector Insurance Sector Financial auxiliaries

Figure 30. NFA by financial sectors

Source: CBK (2017)


36 |

the positive balance of NFA contributed also the banking sector NFA with a share of 17.3 percent

while, microfinance sector was the only one to mark a negative balance of 3.8 percent of total

NFA (figure 30).

The exposure of pension funds to

external sector remains high, where

foreign assets comprise 91.9 percent of

total assets of the pension funds, which

mainly are in the form of shares and

other equities. The CBK remains the

second most exposed institution to

external sector, where 80.4 percent of

assets of the CBK are invested abroad,

primarily in the form of deposits in

banks outside Kosovo and in securities

abroad. While, liabilities to external

sector account for 18.9 percent of total

liabilities of the CBK, mainly in the

form of the account with IMF. The

banking sector continues to have the

lowest exposure to the external sector,

while the insurance sector has almost no

exposure at all to external sector. In

2016, the ratio of foreign assets to total

assets of the banking sector was 16.9

percent, while the ratio of external

liabilities to total liabilities of the

banking sector was 4.9 percent, which

reflects the low rate of support of the

banking sector from the external

financing. Unlike other sectors,

microfinance sector has an interaction

with the external sector only in the context of liabilities, where 64.5 percent of the activity of this

sector is financed from abroad. This is due to the use of microfinance sector of external credit

lines to finance its lending activity, given that MFIs have no legal rights to receive deposits

(figure 31).

The value of assets of the microfinance sector in external sector reached EUR 3.06 billion,

corresponding to an annual growth of 3.1 percent (figure 32).11 The increase of foreign assets was

mainly supported by the increase of investments of pension funds sector of 20.2 percent, mainly

in the form of shares and other equities. Also, to the increase of assets of financial system, had an

impact the increase of 8.6 percent of investments from the banking sector in external sector,

mainly in the form of securities and deposits.

In 2016, despite the increase of investments in securities, the sharp decline of deposits in the

external sector had an impact on total foreign assets of the CBK to mark an annual decline of

13.5.

The main category of assets in the external sector is comprised of shares and other equities,

which belong to pension funds, while this category in 2016 marked an annual increase of 20.3

11

In the context of claims of financial system of Kosovo to external sector was not included in the category of cash. In monetary and financial statistics, the category

“cash”, which is held in the treasuries of commercial banks, is treated as an external asset (claims to nonresidents) due to the fact that EUR currency is not the national

currency of Kosovo, however in this analysis these assets have not been treated as such because they represent assets held in Kosovo.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Financial system CBK Banking Sector Pension Sector MicrofinanceSector

External assets/Total assets External liabilities/Total liabilities

Figure 31. External exposure by financial sectors, December 2016

Source: CBK (2017)

9.2% 3.7% 4.2%

3.1%

0%

5%

10%

15%

20%

25%

30%

0%

20%

40%

60%

80%

100%

2013 2014 2015 2016Special drawing rights Deposits

Securities other than shares Shares and other equities

Loans IMF quota

Other Annual change (right axis)

Figure 32. Assets structure of external sector, in percent

Source: CBK (2017)


| 37

percent. Investments in securities, as the second category within external assets, marked a

significant annual increase of 122.7 percent in 2016 (an increase of 19.8 percent in 2015). The

majority of investments in securities belong to

the CBK, which in this year have quadrupled investments in these financial instruments, while

the remainder of 32.2 percent of investments in securities belong to commercial banks. The third

category of assets in the external sector are deposits, mainly those of commercial banks and

CBK. In 2016, deposits were characterized by a significant annual decline of 49.0 percent, which

mainly may have been as a result of the ECB’s decision to hold the interest rate of deposits in a

negative territory.

The value of total liabilities to external

sector in 2016 reached EUR 539.2

million, representing an annual increase

of 3.1 percent. To the increase of external

liabilities contributed the increase of

liabilities of microfinance sector with

52.6 percent in the form of loans,

followed by the increase of the account of

the CBK at the IMF. The structure of

external liabilities is dominated by the

CBK account at the IMF which marked a

decelerated annual increase (an increase

of 5.9 percent in 2016 compared to the

increase of 19.1 percent in 2015), followed by loans which marked a significant annual increase of

28.2 percent (a decline of 0.2 percent in 2015), whereas the third category of external liabilities is

comprised of deposits, which marked an annual decline of 36.1 percent (figure 33).

4.4% 2.1%

12.5%

3.1%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

0%

20%

40%

60%

80%

100%

2013 2014 2015 2016

Source: CBK (2017)

Deposits SDR allocation

Loans The account at IMF

Other Annual change (right axis)

Figure 33. Structure of external liabilities, in percent


38 |

6. Kosovo’s banking sector

6.1 Structure of the Banking Sector

Banking sector continued to be

concentrated in banks owned by foreign

ownership, which in 2016 managed 88.9

percent of assets and 91.4 percent of the

capital of the banking sector. Among the

banks with foreign ownership, five of

them originate from Austria, Germany,

Slovenia, Albania and Serbia, three of

them have the origin in Turkey, while

only two banks operate with domestic

ownership (figure 34).

In 2016, the banking sector marked a

decline of the banking concentration

rate. Expressed as a ratio of the assets

of three largest banks of the sector, the

banking concentration level marked a

decline from 64.3 percent in 2015 to 62.7

percent in 2016. The decline of the

market concentration is observed also

through the continuous decrease of

Herfindahl-Hirschman Index (HHI)

(figure 35). In the structure of assets,

the category of loans declined by 1.4

percentage points of the concentration

rate, compared to the decline of 1.3

percentage points of the concentration

in deposits. The decline of

concentration, in both loans and

deposits, came as a result of a more

accelerated growth of these items of the

smaller banks. In 2016, three largest

banks marked an annual increase of

loans with 8.3 percent, whereas loans of

other banks increased by 14.9 percent.

As regards to deposits, three largest

banks marked an annual increase of 6.9

percent, compared to the growth of 13.2

percent marked by other banks.

6.2. Activity of the Banking Sector

6.2.1. Assets

During 2016, assets of Kosovo’s banking sector expanded by 7.4 percent and amounted to EUR

3.64 billion (figure 36). The expansion of assets mainly reflects the accelerated lending activity

1600

1650

1700

1750

1800

1850

1900

1950

2000

2050

2013 2014 2015 2016

Assets (HHI) Loans (HHI) Deposits (HHI)

Figure 35. Concentration level in the banking sector

Source: CBK (2017)

8.1%

4.2%

6.2%

7.4%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2013 2014 2015 2016

In m

illio

ns o

f E

UR

Cash and balance with the CBK Balance with commercial banks

Securities Gross loans

Fixed assets Other assets

Annual change of total assets (right axis)

Figure 36. Assets structure of the banking sector

Source: CBK (2017)

23.9% 24.9% 25.4% 24.8%

27.3% 26.4% 24.3% 22.8%

10.1% 9.6% 9.9% 11.1%

1.8% 1.8% 1.8% 1.7%

16.2% 15.6% 14.6% 15.1%

13.3% 13.7% 15.2% 15.1%

2013 2014 2015 2016

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Austria Germany Kosovo Serbia Slovenia Albania Turkey

Figure 34. Structure of banking sector assets, by ownership

Source: CBK (2017)


| 39

during this year. To the increase of the banking sector assets contributed also two other

categories, namely securities and balances with commercial banks (table 2).

Credit portfolio of gross loans increased by 10.4 percent (7.3 percent in 2015), amounting to EUR

2.2 billion. Net loans marked an increase of 11.4 percent, while the improvement of credit

portfolio quality had an impact on the decline of stock of reserves for possible loan losses for 2.5

percent.

Table 2. Assets structure of the banking sector

Source: CBK (2017)

The amount invested in securities by the

banking sector, in 2016, reached EUR

510.3 million, representing an annual

increase of 7.8 percent (23.3 percent in

2015) (figure 37). The increase of

investments in securities is primarily

attributable to the increase of foreign

governments investments in securities

with 9.7 percent, while also investments

of Kosovo’s Government in securities

increased by 5.8 percent (figure 38).

However, the increase of investments in

securities in 2016 was more decelerated

compared to the previous year, which

may be attributed to factors in the

domestic market and in international

markets as well. The increase of

competition by other participants in the

domestic market such as pension funds,

insurance companies, other public

institutions, which have increased their

amount of investments in securities of

Kosovo, and relatively low rates in debt

instruments in foreign markets may

have contributed in decelerating the

increasing pace of investments in

securities.

The balance with commercial banks in 2016 marked an improvement, thus expanding by 8.2

percent compared to the previous year, when it had marked an annual decline of 19.1 percent.

Simultaneously, the category of cash and the balance with the CBK during this period marked an

annual decline of 6.9 percent. Following the decision of the ECB to set negative interest rates, as

of August 2016 the CBK started applying the negative interest rate on the surplus of obligatory

In millions of EUR Share (%) In millions of EUR Share (%) In millions of EUR Share (%) In millions of EUR Share (%)

Cash and balance w ith the CBK 463.3 15.1% 447.1 14.0% 491.0 14.5% 457.3 12.6%

Balance w ith commercial banks 339.9 11.1% 390.8 12.3% 316.0 9.3% 342.0 9.4%

Securities 354.5 11.6% 383.8 12.0% 473.3 14.0% 510.3 14.0%

Gross loans 1,805.8 59.0% 1,882.3 59.1% 2,019.5 59.7% 2,230.0 61.3%

Fixed assets 55.5 1.8% 53.7 1.7% 57.0 1.7% 58.5 1.6%

Other assets 40.3 1.3% 28.8 0.9% 28.5 0.8% 39.0 1.1%

Total assets 3,059.3 100% 3,186.6 100% 3,385.3 100% 3,637.1 100%

Description2013 2014 2015 2016

-25%

-15%

-5%

5%

15%

25%

35%

45%

55%

65%

2013 2014 2015 2016

Source: CBK (2017)

Gross loans Securities

Balance with commercial banks Cash and balance with the CBK

Figure 37. Assets of the banking sector, annual change

28.2%

50.2% 47.8% 46.9%

71.8%

49.7% 52.2% 53.1%

0%

20%

40%

60%

80%

100%

2013 2014 2015 2016

Other financial and nonfinancial corporations Foreign governments

Kosovo’s Government

Figure 38. Structure of securities, in percent

Source: CBK (2017)


40 |

reserve that commercial banks hold at

the CBK. This decision may have

inclined banks to reduce the surplus

level of reserve, which potentially

resulted in the decline of this category.

Loans

In 2016, credit portfolio of loans

increased by 10.4 percent (7.3 percent in

2015), amounting to EUR 2.23 billion

(figure 39).

The launch of the Kosovar Fund for

credit guarantee in 2016 may have had

a positive impact in increasing lending

activity by banks. The increase of

lending in 2016 is attributable to the

increase of lending to enterprises, which

dominate the structure of total loans,

and to the accelerated increase of

lending to households. The majority of

loans of the banking sector continued to

be dominated by loans to enterprises,

which account for 64.1 percent of total

loans, whereas loans to households

represent 35.7 percent of total loans.

Other regional countries have similar

structure of lending, where enterprises

have a higher share to total credit

portfolio (figure 40).

The stock of loans to enterprises marked

an annual increase of 8.3 percent, while

new loans to enterprises in 2016

decreased by 17.3 percent on annual

basis. Loans to households were

characterized with an increase of 14.7

percent, representing an accelerated

growth rate compared with the previous

year (9.3 percent). The sharp increase of

new consumer loans to households had

an impact on the increase of total loans to households, whereas new mortgage loans marked a

pronounced deceleration of increase compared to the previous year.

Structure of loans to enterprises by activity

In the structure of loans to enterprises by economic activity, loans to trade sector continued to

have a higher weight of 52.7 (figure 41). Loans intended for the sector of manufacturing industry

represent 12.2 percent of total loans while the sectors of construction and agriculture comprise

7.3 and 4.2 percent, respectively. In 2016, the sector of mining was characterized with a

significant increase of lending, albeit continued to have low weight to total credit portfolio of

46.9% 64.1% 42.3% 50.9% 43.3% 62.0%

47.0% 35.7% 42.1% 43.4%31.4% 26.9%

6.1% 0.2% 15.6% 5.7% 25.3% 11.1%

0%

20%

40%

60%

80%

100%

Bosnia andHerzegovina

Kosovo Montenegro Macedonia Serbia Albania

Source: Central banks of respective countries (2017)

Other Households Enterprises

Figure 40. Structure of loans by sectors in region countries

23.0% 21.7% 24.5% 23.6%

9.8% 8.5% 7.5% 7.3%

52.6% 53.7% 51.2% 52.7%

10.8% 12.2% 12.3% 12.2%

3.8% 4.0% 4.5% 4.2%

0%

20%

40%

60%

80%

100%

2013 2014 2015 2016

Source: CBK (2017)

Agriculture Manufacturing Trade Construction Other sectors

Figure 41. Structure of loans by economic activity, in percent

2.4%

4.2%

7.3%

10.4%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

11%

12%

-2%

0%

2%

4%

6%

8%

10%

12%

2013 2014 2015 2016

Source: CBK (2017)

Other Households

Enterprises Annual change of loans (right axis)

Figure 39. Contribution of the sectors to total loans growth, in percentage points


| 41

enterprises. The increase of lending to mining sector may have come as a result of the activity

increase of this sector marked in 2016 compared to previous year, which to some extent may be

attributed to bringing back the activities of Feronikel enterprise and expectations on the increase

of metal prices in international markets (figure 42).

Trade sector was characterized with an

accelerated annual increase of 8.8

percent in 2016 (1.3 percent in the

previous year), while manufacturing

sector marked a slowdown annual

increase of 4.5 (7.3 percent in 2015).

It is worth noting that lending to

construction sector was characterized

with an interruption of the previous

year’s declining cycle, marking an


Whereas, the only sectors that were

characterized with an annual decline of

lending were the agriculture and financial services, and real estate services, which marked an

annual decline of 0.3 percent and 39.5 percent, respectively. Within lending to enterprises,

banking sector is assessed to have high concentration of lending to specific economic activities. In

this context, trade sector has a share of

62.5 percent to total loans granted by

three largest banks. Also,

manufacturing sector dominates the

credit portfolio of three largest banks

with around 72 percent of total loans to

enterprises. Within the economic sector,

agriculture sector has the highest

concentration level, where only one bank

represents almost half of the credit

portfolio of loans to agriculture.

Structure of loans by maturity

Structure of loans by maturity remained

the same to previous years, being

represented with 36.5 percent from mid-

term loans “over 2 up to 5 years”.

However, in 2016, long-term loans with

a maturity “over 5 years” increased their

share by 2.1 percentage points reaching

36.3 percent of credit portfolio. In this

period, with a decline of 1.5 percentage

points of their share were characterized

loans with a maturity of “over 2 up to 5

years” (figure 43). Loans to households

are dominated mainly by loans with

maturity of “over 5 years”, which have a

-24%

-14%

-4%

6%

16%

26%

36%

46%

56%

2013 2014 2015 2016

Agriculture ConstructionEnergy ManufacturingMining TradeFinancial services and real estate Other services

Source: CBK (2017)

Figure 42. Loans by economic activity, annual change

28.4% 29.7% 34.1% 36.3%

38.9% 39.6%38.1% 36.5%

7.7% 7.3%9.6% 6.2%

25.0% 23.5% 18.2% 21.0%

0%

20%

40%

60%

80%

100%

2013 2014 2015 2016

Source: CBK (2017)

Up to 1 year Over 1 year up to 2 years Over 2 years up to 5 years Over 5 years

Figure 43. Structure of loans by maturity, in percent

26.3% 54.4%

37.9%

33.8%7.1%

4.8%28.7%

7.0%

0%

20%

40%

60%

80%

100%

Enterprises Households

Source: CBK (2017)

Up to 1 year Over 1 year up to 2 years Over 2 years up to 5 years Over 5 years

Figure 44. Structure of loans to households and enterprises by maturity, December 2016


42 |

share of 54.4 percent to total loans to households, while concerning enterprises, loans with a

maturity of “over 2 up to 5 years” have the highest share, namely 37.9 percent to total loans to

enterprises (figure 44).

Loans with short term of maturity, more specifically “up to 1 year”, in 2016, expanded their share

to total loans for 2.8 percentage points, while loans with maturity of “over 1 up to 2 years”,

decreased their share for 3.4 percentage points.

New loans

New loans issued by the banking sector, until 2016, totaled EUR 1.02 billion, corresponding to an

annual decline of 7.0 percent (figure 45).

A contribution to the decline of total new loans was given by loans to enterprises, which marked

an annual decline of 17.3 percent, while new loans designated for households marked an annual

increase of 10.8 percent (figure 46).

Within new loans to enterprises, investment loans, which represent the majority of these loans

(55.2 percent), marked an annual decline of 28.2 percent (figure 47). Whereas, non-investment

loans, which in 2016 had a share of 37.2 percent to new loans to enterprises, marked an annual

increase of 4.2 percent. The remainder of new loans issued to enterprises is comprised of loans

with favorable conditions.

Structure of new loans to households continued to be dominated by consumer loans with 72.5

percent, which marked a sharp annual increase of 18.5 percent (a decline of 2.8 percent in 2015)

(figure 48). Whereas, new mortgage loans increased by 5.3 percent in 2016, representing a

slower pace compared with the increase of 27.6 percent in 2015.

2.4%

4.2%

7.3%

10.4%

2.4%

30.4%

10.9%

-7.0%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

2013 2014 2015 2016

Source: CBK (2017)

Total loans New loans

Figure 45. Total loans and new loans, annual change

0

100

200

300

400

500

600

700

2013 2014 2015 2016

Source: CBK (2017)

New loans to enterprises New loans to households

Figure 46. New loans, in millions of EUR

-0.1%

31.5%

13.6%

-17.3%

6.6%

28.7%

6.6%

10.8%

-20%

-10%

0%

10%

20%

30%

40%

2013 2014 2015 2016

Source: CBK (2017)

New loans to enterprises New loans to households

Figure 47. New loans by sectors, annual change

63.6%

29.5%

6.9%

67.8%

16.8%12.3%

55.2%

37.2%

7.6%

72.5%

15.9%

8.3%

0%

15%

30%

45%

60%

75%

90%

Investment Non-investment With favorableconditions

Consumer Mortgage With favorableconditions

Loans to enterprises Loans to households

Source: CBK (2017)

2015 2016

Figure 48. New loans by sectors and purpose of use


| 43

The effect of new loans issued during the year, to the increase of the stock of loans was declined

by the value of write-off loans and by returned loans during the period.

Since write-off loans declined the increasing effect of new loans to the increase of total stock of

loans for 1.3 percent, returned loans off-set this effect for 72.4 percent.

Bank Lending Survey12

The latest results of the bank lending survey13 reflect the developments in bank lending activity

during the period September 2016 to February 2017 (referred as P1 2017)14, and expectations for

lending activity for the period March-September 2017 (referred as P2 2017).

The dynamic of lending activity to enterprises during this period, based on the bank lending

survey, results to be affected positively by credit supply side. Banks have reported to have eased

applied standards during the process of enterprise applications assessment for loans. Within

loans to enterprises, banks declared that credit standards for SMEs eased compared to standards

applied for large enterprises.

For the period of March to September 2017, banks stated that they expect an ease of credit

standards for enterprises in general, especially for loans to SMEs (figure 49).

Within credit supply side, banks have also reported to have eased terms and conditions of

lending to enterprises. Banks mainly eased lending conditions for SMEs by decreasing the

average interest rates, the increase of the amount of approved loans, the increase of maturity and

the decline of collateral requirements. Concerning loans to large enterprises, banks stated to

have decreased the interest rate, increased the amount of approved loans, whereas have

tightened to some extent conditions for this category by increasing the collateral requirements

(figure 50).

For the period of March to September 2017, banks expect an ease of lending conditions, albeit

slight tightening of some lending conditions for two categories of enterprises. More specifically,

for SMEs banks declared an increase of interest rates, while for large enterprises is expected an

increase of collateral requirements and a decrease of maturity to some extent. Nevertheless, the

average interest rate on loans for both categories is expected to follow a declining trend.

12

Bank Lending Survey is conducted by the Central Bank of the Republic of Kosovo with banks that operate in Kosovo. The survey is realized twice within a year,

conveying the period March-September and October-February. 13

Replies of individual banks were aggregated by using the appropriate weight of each single bank to total credit portfolio of the banking sector. Positive values of the

index of credit standards show ease of lending whereas negative values are characterized with a tightening of lending. Also, positive values of the index of demand show

an increase of demand and the negative values show a decline. 14

The period of September-February of each year is referred as “the first period”-P1, while the period of March-August” of each year is referred as “the second period”-

P2.

-0.20

-0.10

0.00

0.10

0.20

0.30

0.40

P1

20

15

P2 2

015

P1

20

16

P2

20

16

P1

20

17

P2

20

17

P1

20

15

P2

20

15

P1

20

16

P2

20

16

P1

20

17

P2

20

17

P1

20

15

P2

20

15

P1

20

16

P2

20

16

P1

20

17

P2 2

017

Tig

hte

ne

dE

ase

d

Current value Expected value

Overall SME Large enterprises

*Dashed lines represent the respective expected value for the period March-September 2016

Source: CBK (2017)

Figure 49. Bank's credit standards applied when assessing credit applications of enterprises


44 |

Main factors which had an impact on eased banking policies of lending, during the reporting

period, according to banks, were primarily internal factors, namely the increase of competition in

the financial system and the improvement of credit quality.

During the reporting period, banks declared a decline of demand for loans from enterprises to

some extent. The decline of demand for loans was higher from large enterprises compared to

loans to SMEs which marked a slight decline of demand (figure 51).

Within the demand for loans from enterprises, banks evaluated that factors which had an impact

on the demand of loans were shifted from the need of enterprises for financing the inventories

and labor capital, to the need for refinancing the debt and fixed investments to some extent.

For the period of March to September 2017, banks expect an increase of demand for loans from

two categories of enterprises.

Within the demand for loans, banks reported a deterioration of the quality of applications

received from two categories of enterprises, especially from large enterprises.

Lending activity to households, during the reporting period is assessed to have positively been

affected by the credit supply side. More specifically, eased credit standards were applied

especially for loans intended for house purchase (figure 52). At the same period, banks reported a

slight tightened credit standards applied by banks throughout the process of application

assessments for consumer loans to households.

During the six upcoming months (March-September 2017), banks expect to ease credit standards

and an improvement of lending conditions for two categories of loans to households, namely

consumer loans and loans designated for house purchase.

P1

20

15

P2

20

15

P1

20

16

P2

20

16

P1

20

17

P2

20

17

SMEs

P1

20

15

P2

20

15

P1

20

16

P2

20

16

P1

20

17

P2

20

17

Net interestmargin inmedium-sizeloans

Amount ofloan

Maturity

Otherpaymentsexcept interestrate

Collateralrequirements

Large enterprises

-0.3

-0.2

-0.1

0.0

0.1

0.2

0.3

0.4

0.5

0.6

P1

20

15

P2

20

15

P1

20

16

P2

20

16

P1

20

17

P2

20

17

tig

hte

ne

d e

ase

d

Overall

Figure 50. Terms and conditions applied for loans to enterprises (March – September 2016)

-0.3

-0.2

-0.1

0.0

0.1

0.2

0.3

0.4

0.5

0.6

P1

20

15

P2

20

15

P1

20

16

P2

20

16

P1

20

17

P2

20

17

P1

20

15

P2

20

15

P1

20

16

P2

20

16

P1

20

17

P2

20

17

P1

20

15

P2

20

15

P1

20

16

P2

20

16

P1

20

17

P2

20

17

Declin

e

I

ncre

ase


Overall SMEs Large enterprises

Source: CBK (2017)

Figure 51. Enterprise demand for loans


| 45

Within households, improvement of lending conditions for house purchase, during the reporting

period, was primarily realized through a decline of interest rates on loans, the increase of size of

approved loans and the decline of collateral requirements (figure 53). Conditions for consumer

loans were mainly realized through the decline of average interest rates, the reduction of other

interest burdens and the decline of collateral requirements. However, banks declared size

reduction of consumer loans amount.

In the six upcoming months, banks declared that they expect an ease of lending conditions for

households, especially for loans designated for house purchase, through the decline of interest

rate and increase of approved amount of loans. The increase of competition in the credit market

and the decline of nonperforming loans represented the key factors that are expected to affect the

ease of credit standards for households.

Banks have reported a significant increase of demand for loans intended for house purchase by

households, while a slight decline of demand for consumer loans (figure 54). The increase of

demand from households for house purchase was attributed to developments in the real estate

market and the increase of consumers’ confidence. Also, the received application forms, for

consumer loans and loans for house purchase, results to have been improved.

For the period of March to September 2017, banks expect an increase of demand for loans from

both household categories, especially for loans for house purchase.

-0.1

0.0

0.1

0.2

0.3

0.4

0.5

P1

20

15

P2

20

15

P1

20

16

P2

20

16

P1

20

17

P2

20

17

P1

20

15

P2

20

15

P1

20

16

P2

20

16

P1

20

17

P2

20

17

P2

20

15

P1

20

16

P2

20

16

P1

20

17

P2

20

17

P2

20

17

Tig

hte

ne

d

Ea

se

d


Household loans for house purchase Consumer loansOverall

*Dashed lines represent the respective expected value

Source: CBK (2017)

Figure 52. Bank's credit standards applied when assessing household credit applications

Source: CBK (2017)

-0.2

-0.1

0.0

0.1

0.2

0.3

0.4

P1

20

15

P2

20

15

P1

20

16

P2

20

16

P1

20

17

P2

20

17

tig

hte

ne

d e

ase

d

Total loans to households

P1

20

15

P2

20

15

P1

20

16

P2

20

16

P1

20

17

P2

20

17

Net interestmargin inaverageloans

Amount ofloan

Maturity

Otherpaymentsexceptinterest rate

Collateralrequirements

Consumer loans

P1

20

15

P2

20

15

P1

20

16

P2

20

16

P1

20

17

P2

20

17

Loans to households for house purchase

Figure 53. Terms and conditions applied for loans to households

(March – September 2016)


46 |

Regarding maturity, banks have declared for eased conditions of lending for long-term loans, and

an increase of demand for these loans, which was reflected also through the increase of demand

for loans designated for house purchase. As regards to financing the banks, they have declared

that the main source of financing during the reporting period were deposits, especially household

deposits. Whereas, in the six upcoming months, banks expect an increase of financing through

household deposits and a decline of financing from enterprise deposits.

6.2.2. Liabilities and Own Resources

The activity of Kosovo’s banking sector continues to be financed by deposits collected within

Kosovo’s economy, which comprise 79.7 percent of total liabilities and own resources (table 3).

Table 3. Structure of liabilities and own resources of the banking sector

Source: CBK (2017)

Another quite important source of financing the banking sector are own resources (equity), which

in 2016 marked an increase, mainly as a result of the profit increase realized by banks.

Despite of the quite low share of 1.6 percent of financing the activities of banks which operate in

Kosovo, the category of the balance from commercial banks marked the highest annual increase

of 36.2 percent. Whereas, the category of subordinated debt, which represents only 1.1 percent of

total financing, marked an annual increase of 4.2 percent.

Deposits

In 2016, for the second consecutive year, deposits were characterized by accelerated growth pace.

At end-2016, deposits increased by 7.2 percent, amounting to EUR 2.90 billion.

To the steady increase of deposits mainly contributed the increase of households deposits, which

at the same time are considered a more sustainable financing source compared to other financing

channels. Household deposits, which comprise 73.2 percent of total deposits, marked an annual

increase of 8.0 percent (6.4 percent in 2015) (figure 55). The second category of deposits by

-0.10

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

P1

20

15

P2

20

15

P1

20

16

P2

20

16

P1

20

17

P2

20

17

P1

20

15

P2

20

15

P1

20

16

P2

20

16

P1

20

17

P2

20

17

P1

20

15

P2

20

15

P1

20

16

P2

20

16

P1

20

17

P2

20

17

De

clin

e

In

cre

ase


Consumer loans Total loans to householdsTotal loans to households

Source: CBK (2017)

Figure 54. Household demand for loans

In millions of EUR Share (%) In millions of EUR Share (%) In millions of EUR Share (%) In millions of EUR Share (%)

Balance w ith other banks 16.5 0.5% 32.2 1.0% 43.4 1.3% 59.1 1.6%

Deposits 2,449.0 80.1% 2,537.5 79.6% 2,702.9 79.8% 2,897.8 79.7%

Other borrow ings 13.4 0.4% 14.1 0.4% 17.6 0.5% 17.8 0.5%

Other liabilities 246.2 8.0% 232.8 7.3% 191.8 5.7% 203.4 5.6%

Subordinated debt 56.3 1.8% 47.3 1.5% 36.9 1.1% 38.4 1.1%

Ow n resources 277.8 9.1% 323.1 10.1% 392.7 11.6% 420.6 11.6%

Total liabilities and own resources 3,059.3 100% 3,187.0 100% 3,385.3 100% 3,637.1 100%

Description 2013 2014 2015 2016


| 47

importance (23.1 percent of total

deposits), namely enterprise deposits,

marked an accelerated annual increase

of 14.6 percent (4.2 percent in 2015).

In the structure of enterprise deposits,

in 2016, it was observed an increase of

the weight of deposits of other financial

corporations and public corporations.

Conversely, deposits of other

nonfinancial corporations (private

enterprises) declined their share to total

enterprise deposits (figure 56). Other

financial corporation deposits and public

corporation deposits marked an

accelerated annual increase of 32.7

percent and 56.2 percent, respectively,

whereas other nonfinancial corporation

deposits marked a more decelerated

increase of 9.3 percent compared to the

increase of 21.6 percent marked in the

previous year.

The remainder of total deposits is

comprised of nonresident deposits with

a share of 2.4 percent and other deposits

(the government and other non-

governmental organizations) with a

share of 1.3 percent. Nonresident

deposits marked a significant annual

decline of 38.6 percent compared to the

increase of 27.6 percent in the previous

year (figure 57) while, other deposits

were characterized with an annual

decline of 3.1 percent mainly as a result

of the decline of local government

deposits at commercial banks.

Structure of deposits by maturity, in

percent

The structure of deposits by maturity is

dominated by transferable deposits,

which in 2016 increased their share, unlike time deposits and saving deposits which decreased

their share to total deposits of the sector (figure 58). These developments in the structure of

deposits may be attributable to some extent to the low level of interest rates on deposits that

characterized the market.

In 2016, transferable deposits increased annually by 13.7 percent, while time deposits marked an

increase of 5.2 percent. Conversely, saving deposits decreased by 7.2 percent in 2016. Enterprise

deposits contributed to the increase of time deposits, which grew by 25.8 percent, while

household time deposits marked a decline of 2.9 percent.

72.5% 72.8% 72.7% 73.2%

22.7% 22.1% 21.6% 23.1%

7.5%3.6%

6.5%

7.2%

-1%

1%

3%

5%

7%

9%

11%

13%

15%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2013 2014 2015 2016

Source: CBK (2017)

Other deposits Non-resident deposits

Enterprise deposits Household deposits

Annual change to total deposits (right axis)

Figure 55. Structure of banking sector deposits

15.5% 18.2%12.0% 13.9%

13.0% 11.0%

5.4%7.2%

71.5% 70.8%82.6% 78.8%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2013 2014 2015 2016

Source: CBK (2017)

Other nonfinancial corporations Other public corporations Other financial corporations

Figure 56. Structure of enterprise deposits

89.1 88.9

113.5

69.7

0

20

40

60

80

100

120

2013 2014 2015 2016

In m

illio

ns o

f E

UR

Source: CBK (2017)

Figure 57. Nonresident deposits


48 |

However, it is worth noting that within the structure of time deposits, in 2016, was marked a

decline of time deposits with longer term

of maturity (figure 59). Compared to

2015, the year 2016 registered a sharp

increase of 79.0 percent of deposits with

shorter term of maturity “up to 1 year”,

and a slowdown increase of deposits with

a maturity of “over 2 years” (an increase

of 1.2 percent in 2016 following a 19.8

increase in 2015), while deposits with a

maturity “over 1 up to 2 years” marked

an annual decline of 45.1 percent (29.5

percent in 2015).

6.2.3. Interest Rates

Average interest rates on loans

continued to be characterized with a

decline also in 2016. Conversely, average

interest rate on deposits marked a slight

increase for the second consecutive year.

Average interest rate on new loans

declined to 7.2 percent from 7.7 percent

in the previous year, whereas average

interest rate on deposits increased by 0.1

percentage points reaching 1.2 percent.

A more significant decline of interest

rate on loans was reflected in a reduction

of interest rate spread of loans and deposits which fell at 6.0 percent, from 6.5 percent in 2015

(figure 60).

Average interest rates on loans and deposits in Kosovo’s banking sector stand at approximate

same average levels of interest rates of the region countries (figure 61).

1.6%1.2% 1.1%

2.5%

0.8%

5.2%

7.2%8.0%

6.6%

10.0%

0%

2%

4%

5%

7%

9%

11%


Kosovo Montenegro Macedonia Albania

Source: CBK, IMF (2017)

Interest Rates on Deposits Interest Rates on Loans

Figure 61. Interest rate in Kosovo and in region countries (2016)

0%

2%

4%

6%

8%

10%

12%

14%

December 2013 December 2014 December 2015 December 2016

Source: CBK (2017)

Interest Rates on LoansInterest Rates on DepositsLoans to deposits ratio (percentage points)

Figure 60. Average interest rate

36.8% 47.2%54.7% 57.9%

46.7% 31.7%24.8%

24.3%

16.5% 21.1% 20.6% 17.8%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2013 2014 2015 2016

Source: CBK (2017)

Saving deposits Time deposits Transferable deposits

Figure 58. Structure of deposits by maturity

62.1% 50.5%26.0% 44.3%

18.8%22.7%

35.3% 18.4%

19.1% 26.8% 38.7% 37.2%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2013 2014 2015 2016

Source: CBK (2017)

Over 2 years Over 1 year up to 2 years Up to 1 year

Figure 59. Structure of time deposits


| 49

Interest Rates on Loans

The average interest rates on loans to

enterprises and loans to households, as

well, continued to decrease. The the

average interest rate on loans to

enterprises decreased to 6.8 percent

(figure 62). All the categories of new

loans to enterprises were characterized

with a decline of interest rates. The

average interest rate by investment

loans decreased to 6.7 percent, while

the average interest rate on non-

investment loans decreased to 7.0

percent (figure 63).

Interest rates declined for all the

categories of loans to enterprises by

maturity, besides those with a maturity

“over 1 up to 2 years”. This category,

which at the same time has the highest

interest rate of 7.8 percent, was

characterized with an increase of

interest rate by 0.4 percentage points in

2016. A significant decline of interest

rate at 6.8 percent from 8.0 percent was

marked on loans to enterprises with a

maturity of “up to 1 year” (figure 64).

With a decline of interest rates were

characterized all the categories of loans by economic activity. A more pronounced decline of

interest rate was marked by loan to services sector, which in 2016 fell to 6.8 percent. The second

most significant decline of interest rate was marked by loans to agriculture sector which fell to

6.7 percent and at the same time reaching the lowest level within economic activities. The sector

of industry was characterized as well with a decline dropping to 7.0 percent (figure 65).

Regarding loans to households, the average interest rate decreased to 7.9 percent from 8.4

percent in 2015. The most significant decline of interest rate was marked by mortgage loans at

6.1 percent. Whereas, the interest rate of consumer loans slightly decreased to 8.3 percent (figure

66).

5%

6%

7%

8%

9%

10%

11%

12%

13%


Source: CBK (2017)

Up to 1 year Over 1 year up to 2 years

Over 2 year up to 5 years Over 5 year up to 10 years

Figure 64. Average interest rate on loans to enterprises, by maturity

2%

4%

6%

8%

10%

12%

14%

16%


Source: CBK (2017)

Agriculture Industry Services

Figure 65. Average interest rate on loans to enterprises, by economic activity

6%

7%

8%

9%

10%

11%

12%

13%


Source: CBK (2017)


Figure 62. Average interest rate on loans to enterprises and households

5%

6%

7%

8%

9%

10%

11%

12%

13%

14%


Source: CBK (2017)

Investment loans Non-investment loans

Overdrafts Credit lines

Figure 63. Average interest rate on loans to enterprises, by purpose


50 |

Within mortgage loans, those with

longer term of maturity had more

favorable interest rates compared to

loans with shorter term of maturity. A

lower interest rate of 5.8 percent was

registered in mortgage loans with a

maturity “over 5 up to 10 years”, while

the highest interest rate of 6.6 percent

was recorded in loans with a maturity of

“over 2 up to 5 years”.

Interest Rates on Deposits

Average interest rate on deposits

increased to 1.24, in 2016, compared to 1.15 percent as it was in 2015. The increasing trend of

interest rate of deposits mainly was impacted by the increase of interest rate of enterprise time

deposits (figure 67). Interest rate on enterprise deposits was characterized with an increase

unlike in the previous year when it had been marked a decline, thus standing at a higher level

than the interest rate of household

deposits, which was characterized with

a decline.

The average interest rate on enterprise

deposits increased to 1.6 percent. The

increase of interest rate, among others,

may have been influenced by banks

reaction to stimulate an increase of

enterprise deposits. The level of interest

rates on enterprise deposits was driven

by interest rate on time deposits, which

in 2016 marked the highest interest rate

of 1.6 percent in the category with a

maturity “over 6 months up to 1 year”.

The interest rate on saving deposits increased to 0.2 percent (figure 68).

The interest rate on household deposits in 2016 declined to 1.0 percent from 1.1 percent in 2015

(figure 67). The decline of the average interest rates on deposits reflects the decline of interest

rate on time deposits, given that other deposits have very low interest rates (figure 69).

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

1.8%

2.0%


Source: CBK (2017)

Interest rate on transferable deposits Interest rate on saving deposits

Interest rate on time deposits

Figure 68. Average interest rate on enterprise deposits, by categories

0.0%

0.4%

0.8%

1.2%

1.6%

2.0%

2.4%

2.8%


Source: CBK (2017)

Interest rate on transferable deposits Interest rate on saving deposits

Interest rate on time deposits

Figure 69. Average interest rate on household deposits, by categories

3%

5%

7%

9%

11%

13%

15%

17%


Source: CBK (2017)

Loans to households Consumer loans to households

Mortgage loans to households Household overdrafts

Figure 66. Average interest rate on loans to households, by purpose

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%


Source: CBK (2017)


Figure 67. Average interest rate on deposits


| 51

Within household time deposits, the lowest interest rate of 0.3 percent was recorded by deposits

with maturity “over 3 up to 6 months”, while the highest interest rate of 2.0 percent was recorded

by deposits with maturity “over 2 years”,

despite the fact that interest rates for

this category of deposits marked the

most significant decline of 0.25

percentage points.

6.3. Performance of the Banking Sector

Banking sector continued to be

characterized with a good financial

performance, thus keeping high level of

profitability. The profit of the sector, in

December 2016, amounted to EUR 75.5

million, representing a decline compared

to the previous year when it was marked

the highest profit ever realized by the

banking sector reaching EUR 94.7

million (figure 70). The profit decline of

20.2 percent was a result of the decline

of net interest income on one hand, and

the increase of loan loss provision

expenses and expenses of fees and

commissions on the other hand.

Income

Income of the banking sector during four

recent years have followed a declining

trend. The value of income accumulated during 2016 was EUR 231.1 million, corresponding to an

annual increase of 3.0 percent. The main impact of income decline was marked by the decrease of

total interest income, which marked an annual decline of 4.0 percent. The decline of interest

income was caused mainly by the decline of interest rate on loans in the recent years.

With a decline was characterized also the second category of income represented by non-interest

income (figure 71), the value of which

was lower for 0.7 percent compared to

the previous year. This decline came as a

result of a pronounced decline of 25.5

percent of other operating income, while

income from fees and commissions,

which represent around 90 percent of

non-interest income, increased by 1.5

percent.

Expenses

Unlike three previous years which were

characterized with a decline of expenses,

the banking sector in 2016 marked an

increase of expenses. The total value of expenses of the sector reached EUR 155.6 million, thus

25.9

60.0

94.7

75.5

249.0 244.2 238.2

231.1223.0

184.2

143.5155.6

0

50

100

150

200

250

300


In m

illio

ns o

f E

UR

Source: CBK (2017)

Profit Income Expenses

Figure 70. Financial performance of the banking sector

78.8% 79.2% 78.1% 77.2%

19.9% 19.6% 21.5% 22.0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


Source: CBK (2017)

Revaluation income Non-interest income Interest income

Figure 71. Income structure of the banking sector, in percent

28.6% 23.9%15.8% 11.7%

24.9%

17.2%

2.5%21.2%

45.1%55.3%

74.9%

63.9%

1.5% 3.7%

6.8% 3.1%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2013 December 2014 December 2015 December 2016 December

Source: CBK (2017)

Interest expenses Non-interest expenses

General and administrative expenses Losses from revaluation

Fees provisions

Figure 72. Banking sector expenses, in percent


52 |

representing an increase of 8.4 percent compared to 2015. The increase of expenses came as a

result of the increase of loan loss provisions, general expenses and expenses on fees and

commissions.

The structure of expenses continued to

be dominated by the category of general

and administrative expenses with a

share of 63.9 percent to total expenses,

followed by non-interest expenses with a

share of 21.2 percent and interest

expenses with a share of 11.7 percent

(figure 72).

General and administrative expenses

until December 2016 marked an annual

decline of 7.5 percent. The decline of

this category was mainly impacted by

other non-interest expenses which marked an annual decrease of 55.9 percent. Also, personnel

expenses marked a decline of 3.4 percent, while the category of general expenses registered an


The second category of expenses, which

is comprised of non-interest expenses,

was characterized with a significant

annual increase in 2016, thus affecting

the increase of total expenses of the

banking sector (figure 73). The increase

of these expenses mainly is attributed to

the significant increase of EUR 25.1

million of loan loss provision expenses.

This increase of provision expenses is a

result of credit growth, and the increase

of written-off loans during this period.

Consequently, banks have increased

their expenses on provisions, in order to

continue to keep at high level the ratio of nonperforming loans with loan loss provisions.

Despite the slight increase of the annual average of interest rate on deposits, interest expenses

continued to decline, marking an annual decline of 19.6 percent in 2016 (figure 73). The decline of

this category of expenses reflects the decline of new time deposits in the two previous years.

Profitability and efficiency

Profitability indicators continued to remain at high levels. However, as a result of the profit

decline, Return on Average Assets (ROAA) decreased to 2.3 percent, while the Return on Average

Equity (ROAE) decreased to 19.7 percent15 (figure 74).

The general efficiency indicator, expressed through expenses to general income ratio, marked a

slight deterioration, as well, compared to the previous year. This ratio increased to 67.3 percent,

as a result of the increase of expenses and the decline of income (figure 75). Table 4 through

certain indicators depicts the measurement of the efficiency of the banking sector in generating

15

Profit is prior to tax.

63.8

44.0

22.6

18.2

55.5

31.6

3.6

33.1

100.5

101.8

107.5

99.5

0

20

40

60

80

100

120

2013 June 2014 June 2015 June 2016 June

Source: CBK (2017)

Interest expenses Non-interest expenses

General and administrative expenses

Figure 73. Value of banking sector expenses

1.0% 2.2% 3.2%2.3%

10.5%

22.5%

29.1%

19.7%

0%

5%

10%

15%

20%

25%

30%

35%

0

10

20

30

40

50

60

70

80

90

100

2013 2014 2015 2016

In m

illio

ns o

f E

UR

Source: CBK (2017)

Profit Return on Average Assets (right axis)

Return on Average Equity (right axis)

Figure 74. Profitability indicators of the banking sector


| 53

income from assets (loans, securities and borrowings to other banks), and management of

expenses (of deposits, subordinated debt and other borrowings).

The ratio of non-interest income to the

average of assets that bear interest has

marked a decline of 0.6 percent, as a

consequence of the increase of assets

which bear interest on one hand and the

decline of interest income on the other

hand. Also, the ratio of interest expenses

to the average of liabilities that bear

interest improved by declining for 0.3

percent, implying the decline of expenses

created by the usage of client assets

mainly as a result of the quite low

interest expenses on deposits. The

decline of interest rates on loans and the

slight increase of interest rate on deposits had an impact on the decline of net interest income,

thus consequently declining the net interest margin at 5.5 percent from 5.9 percent as it was in

the previous year.

Table 4. The key efficiency indicators of the banking sector, in percent

Source: CBK (2017)

The annual decline of operational expenses and the increase of assets had an impact on the ratio

between them to be lower than it was until December 2015 ( table 4).

The utilization of the banking sector capacities, expressed through the indicator of the average

value of assets managed by an employee, marked an improvement (table 5). This improvement

was impacted by the higher increase of the banking sector activities, along with the same

number of employees in this sector compared to the previous year. The ratio of total expenses of

the staff and the number of employees in the banking sector recorded an improvement as well,

reflecting expenses decline on employees, while the number of employees remained unchanged,

implying a decline of expenses per employee (table 5).

Table 5. Capacity indicators of the banking sector

Source: CBK (2017)

Interest income/average of income bearing assets 8.3% 7.4% 6.7% 6.1%

Interest expenses/average of expense bearing liabilities 2.8% 1.8% 0.9% 0.6%

Net interest margin (net interest income/average of interest bearing assets) 5.6% 5.7% 5.9% 5.5%

Operational expenses/total assets 3.3% 3.2% 3.2% 2.7%

Description December 2013 December 2014 December 2015 December 2016


Assets/no. of employees (in thousands of EUR) 862.0 908.6 1,003.1 1,077.6

Personnel expenses/no. of employees (in thousands of

EUR) 11.9 12.1 13.0 12.6

89.6%

75.3%

60.4%

67.3%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


Source: CBK (2017)

Figure 75. Expenses-to-income ratio, in percent


54 |

6.4 Risks of the banking sector

Main indicators of the banking risks stood at satisfactory level in 2016 (table 6). Liquidity

position of the banking sector continued to stand at sustainable level, despite the accelerated

increase of lending. The accelerated growth of loans in one hand, and the increase of transferable

deposits which had an impact on the increase of short-term liabilities, on the other hand, had an

impact on the decline of the indicator of liquid assets to short-term liabilities. However, this

indicator continued to remain significantly above the minimal level of 25 percent as required by

the regulation.

Table 6. Risk indicators of the banking sector

Source: CBK (2017)

Also, risk indicators of solvency showed high level of capitalization of the banking sector. The

regulatory capital ratio marked a slight decline as a result of the decline of Tier 2 capital, albeit

the quality of regulatory capital was increased as a result of the growth of Tier 1 capital

supported by the accumulated profit over the years. The level and the current quality of the

capital suggest a sustainability and high ability of the banking sector to cope with potential

losses. The exposure to credit risk continued to decline, being reflected with lower rates of

nonperforming loans to total loans. Also, the coverage level of nonperforming loans with loan

loss provisions increased, showing a satisfactory coverage level of the sector with loan loss

provisions. The concentration of the credit risk in 2016 marked an increase compared to two

previous years. The banking sector continued to have low exposure to market risk. The balance

statement of the banking sector almost entirely was denominated in EUR currency and

consequently has low exposure to exchange rate risk. Loans and deposits of the sector mainly

have fixed interest rates and have no impact of interest rates movements until maturity.

However, there is risk from interest rate in the context of repricing of assets and liabilities which

are sensitive to interest rates. For the short term of maturity “up to 30 days” there was observed

a narrowing of the negative gap compared to the previous year, which declines the exposure of

the banking sector to the risk of possible interest rate increase. Whereas, the cumulative gap up

to 1 year resulted as positive and more expanded, increasing the exposure to the risk of the

possible decline of interest rate. Banks have created a system, policies and appropriate

procedures for managing the operational risk. The management of the risk in 2016 was

appropriate, having no cases of its materialization and by keeping the needed capital for covering

this risk in compliance with the regulatory requirements.

6.4.1 Liquidity risk

Banking sector continued to have good liquidity position, with the main liquidity indicators

standing above the minimal level as a required by the regulation. However, compared to the

previous year, liquidity indicators have marked a decline. Despite of the higher increase of

Description 2013 2014 2015 2016

Loans-to-deposits ratio 73.7% 74.2% 74.7% 77.0%

Liquid assets to total short-term liabilities ratio 48.0% 43.6% 44.9% 41.5%

Capital Adequacy Ratio (CAR) 16.7% 17.8% 19.0% 17.9%

Nonperforming loans (NPL) ratio to total loans 8.7% 8.3% 6.2% 4.9%

NPLL coverage w ith provisions 110.6% 114.4% 115.1% 127.6%

The value of total large exposures to Tier 1 capital ratio129.7% 97.1% 67.3% 71.0%

Opened positions in foreign currency to tier 1 capital 2.6% 1.9% 1.9% 4.6%


| 55

deposits compared to the previous year, a more accelerated increase of loans had an impact on

loans to deposits ratio to stand at 77.0 percent from 74.7 percent as it was in December 2015

(figure 76).

The key liquidity indicator, liquid assets to short-term liabilities ratio decreased to 41.5 percent

from 44.9 percent as it was in December 2015. The decline of the ratio is attributable to the

higher increased rate of short-term liabilities with 6.1 percent, as a result of the shift from time

deposits to transferable deposits, compared to the decline of 2.0 percent of liquid assets (figure

77).

The level of liquid assets in the balance

of the banking sector remained high,

given that in December 2016 liquid

assets accounted for 31.7 percent of total

assets of the sector. Nevertheless, this

ratio is lower than in the previous year

when liquid assets comprised 34.9

percent of total assets. This came as a

result that total assets marked an

increase, whereas liquid assets

decreased.

To the decline of liquid assets, the

largest contribution was marked by the

decrease of cash and reserves held by

banks at the CBK, which is due to the

negative interest rate applied on the

value of assets exceeding the required

reserves held at the CBK, implemented

since August 2016. The cost of assets

which exceeded the required reserve,

alongside with the general accelerated

increasing trend of lending, may have

had an impact on shifting liquid assets

to longer-term of maturities, being

presented by loans, as more profitable

assets. Reserves of the banking sector

marked an annual decrease of 7.9

percent, thus continuing to stand above the level as required by the regulation (figure 78).

48.0%43.6%

44.9%41.5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

-

450.00

900.00

1,350.00

1,800.00

2,250.00


Source: CBK (2017)

Total liquid assets Short-term liabilities Total liquid assets/short-term liabilities

Figure 77. Total liquid assets to short-term liabilities ratio

72%

73%

74%

75%

76%

77%

78%

0

500

1,000

1,500

2,000

2,500

3,000

3,500


Source: CBK (2017)

Loans Deposits Loans-to-deposits ratio (right axis)

Figure 76. Loans and deposits of the banking sector, in millions of EUR

0

50

100

150

200

250

300

350

400

450


Source: CBK (2017)

Obligatory reserve Balance with CBK Cash Total reserves

Figure 78. Banking sector reserves, in millions of EUR

-1500

-1300

-1100

-900

-700

-500

-300

-100

100

300

500

700

900

1-7 days 8 - 30 days 1 - 3Months

3 - 6Months

6 - 12Months

1-5 Years Over 5Years


Figure 79. Liquidity gap*, in millions of EUR

*As of 2015 there is a methodological change in calculation, where equity is not included in calculation

Source: CBK (2017)


56 |

In December 2016, the level of reserve required by the regulation was EUR 247.4 million, while

the value of total reserves held by banks exceeded the level of obligatory reserve for 47.8 percent

as required by the regulation. As stated above, the decline of reserves during this period reflects

banks discouragement to hold reserves above the required level of the obligatory reserve due to

the negative interest rate applied since August 2016. Also, an impact may have been given by the

orientation of assets of banks to more profitable instruments such as loans and securities.

Banking sector was characterized with an increase of “the structural risk of liquidity” in

December 2016, which is reflected through a maturity mismatch of assets and liabilities of the

same maturity term (figure 79). The liquidity gap was expanded for almost all the categories,

besides the category “6 - 12 months” which was characterized with a slight narrowing. Negative

gap16 resulted only in the category with a maturity “1-7 days”, whose value reached EUR -1,478.0

million from EUR -1,168.3 million in December 2015. The deepening of the negative gap for this

category of maturity compared to the previous year came as a result of the decline of assets of

12.4 percent in this category, while liabilities of this category increased by 10.4 percent.

Meanwhile, for all other categories of maturity the gap is negative, and the expansion of the gap

was mainly a result of the increase of assets that was marked in each of the categories.

The decline of assets for the category with a maturity interval of “1-7 days” resulted mainly by

the decline of securities, the decline of deposits in other banks and the decline of loans. Whereas,

the increase of assets in other categories of maturity reflects an increase of long-term lending and

a shift of investments in securities with longer term of maturities.

Conversely, the increase of deposits with short-term maturity was the main factor that had an

impact on the increase of liabilities with maturity of “1-7 days”. The increase of deposits was

marked also in maturities of “1-5 years” and “over 5 years”, while all other categories of maturity

marked a decline.

This general shift of assets towards longer terms of maturities and the shift of liabilities towards

shorter terms of maturities reflects the developments in interest rates. These developments with

a tendency of shifting deposits towards the maturity with short-term, may further expand the

liquidity gap for a short-term period, hence may cause problems in managing liquidity with

longer term of maturity.

6.4.2. Credit risk

The already low nonperforming loans

rate decreased further in 2016.

Nonperforming loans to total loans ratio,

in December 2016, fell t0 4.9 percent

compared to 6.2 percent in the previous

year (figure 80). The decline of NPL

reflects the annual increase of lending of

10.4 percent as well as the significant

improvement of credit portfolio quality,

where the value of nonperforming loans

marked an annual decline of 12.1

percent (figure 81).

The declining trend of NPL started as of

November 2014. It is worth noting that the NPL rate to total loans ratio, in December 2016, was

16

The negative gap implies that liabilities for a specific maturity interval exceed assets and vice versa.

8.7%

8.3%

6.2%

4.9%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%


Source: CBK (2017)

Figure 80. NPL to total loans ratio, in percent


| 57

at the lowest level since end-2010. Also, the NPL rate of the Kosovo’s banking sector remained at

lower level compared to the region countries, which at an average had an NPL rate of 14.2

percent to total loans, in December 2016 (figure 82).

The banking sector exposure to credit

risk was more pronounced in loans to

enterprises which have an NPL rate of

5.5 percent compared to household loans

which have an NPL rate of 2.5 percent.

The majority of economic sectors within

loans to enterprises were characterized

with improvement of credit portfolio

quality. A more significant decline of the

rate of nonperforming loans was marked

by loans to energy sector, which in

December 2016 had an NPL rate of 6.0

percent compared to 19.6 percent in

December 2015. This improvement is

rather attributed to the higher increase

of loans to this sector than to the decline

of the value of nonperforming loans.

While, the manufacturing sector is the

second one by credit portfolio

improvement, as a result of the higher

decline of the value of nonperforming

loans than the increase of loans to this

sector. The NPL rate for the

manufacturing sector decreased to 5.4

percent compared to 11.4 percent in

December 2015. The highest NPL rate

was recorded by agriculture sector with

8.2 percent (figure 83).

The reduction of exposure to credit risk compared to previous periods is presented also through

migration of loans from categories with weaker quality towards categories with no delays (figure

84). “Standard” loans which are classified as the category with no delays increased their share to

total loans for 2.3 percentage points, while “Watch” and “Substandard” loans which are classified

as overdue loans decreased their share with 0.7 percentage points and 0.4 percentage points,

12.1%

4.9%

7.1%

19.5% 18.3%

0%

5%

10%

15%

20%

25%


Kosovo Macedonia Serbia Albania

Source: CBK (2017)

Figure 82. NPL to total loans ratio in Kosovo and in some Western Balkan countries (December 2016)

2.4%4.2%

7.3%

10.8%

18.6%

-0.2%

-20.5%

-12.1%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%


Source: CBK (2017)

Total loans NPL

Figure 81. Total loans and NPL, annual change

0%

5%

10%

15%

20%

25%

Source: CBK (2017)

December 2014 December 2015 December 2016

Figure 83. NPL rate by economic activities

84.7%86.2%

89.9%92.3%

3.0%2.2%

2.2%

1.5%

3.6% 3.3%

1.7%1.4%

2.8% 1.7%

1.5%1.3%

5.9% 6.6%4.7% 3.7%

75%

80%

85%

90%

95%

100%


Source: CBK (2017)

Standard Watch Substandard Doubtful Loss

Figure 84. Structure of loans by classification


58 |

respectively. “Doubtful” and “Loss” loans reduced their share for 0.2 percentage points and 1.0

percentage points, respectively.

Alongside with the general improvement

of credit portfolio quality, also the level

of coverage of NPL with loan loss

provisions has marked an improvement

rising at 127.6 percent, in December

2016 (figure 85). The increase of the

ratio came as a result of the more

significant decline of nonperforming

loans, given that the stock value of

provisions marked a decline. The value

decline of provisions, despite the decline

of provision expenses, in 2016, came as a

consequence of writing off loss loans.

Banking sector also strengthened the

capacity for covering with capital any possible loan losses. This came as a result of the decline of

the value of net nonperforming loans covered by loan loss provision and the increase of the

capital of banks, which had an impact of the net nonperforming loans to capital ratio to decrease

at 2.2 percent from 3.0 as it was in December 2015.

Concentration of credit risk

The rate of credit concentration in

Kosovo’s banking sector, which is

measured as a ratio of total large

exposures to Tier 1 capital, has changed

the two recent years’ declining trend

increasing to 71.0 percent in December

2016 (figure 86). The increase of

concentration rate is attributed to

higher increase of the value of high

credit exposures of 12.6 percent (at EUR

281.6 million), while Tier 1 capital

increased by 6.7 percent.

Despite the increase of the general

value of large exposures, the number of large credit exposures17 declined at 31 from 36 as it was

in December 2015. This development suggest an increase of credit concentration, where the

average value of large exposures rose to EUR 9.1 million (6.9 million in December 2015), thus

following an increasing trend for the fourth consecutive year.

6.4.3. Solvency risk

Kosovo’s banking sector continued to have high level of capitalization. Capital Adequacy Ratio

(CAR), which represents the ratio of total regulatory capital to risk weighted assets, in December

2016, was 17.9 compared to 19.0 percent marked in the previous year, which still remains quite

higher than the required level of 12 percent (figure 87).18

17 Large credit exposure is considered any exposure which exceeds 10 percent of Tier 1 capital.

18 According to the CBK regulation on Capital Adequacy, banks are required to have at least 12 percent of total regulatory capi tal to RWA ratio and at least 8 percent of

Tier 1 capital to RWA ratio.

155.0 154.6

122.9

108.1

110.6%

114.4%115.1%

127.6%

110%

112%

114%

116%

118%

120%

122%

124%

126%

128%

130%

0

20

40

60

80

100

120

140

160

180


Source: CBK (2017)

NPL (in millions of EUR) Provisions/NPL (right axis)

Figure 85. NPL and provisions

129.7%

97.1%

67.3%

71.0%

0%

20%

40%

60%

80%

100%

120%

140%

0

50

100

150

200

250

300

350

400

450


In m

illio

ns o

f E

UR

Source: CBK (2017)

Total large exposures

Total Tier 1 capital

Large exposure to Tier 1 capital ratio (right axis)

Figure 86. Concentration of credit risk


| 59

The decline of the ratio was a result of the higher annual increase of risk weighted assets (RWA)

of 12.3 percent, compared to the annual increase of 5.5 percent of the regulatory capital (figure

88).

The regulatory capital during this year recorded a subdued increase as a consequence of the

decline of Tier 2 capital and a slowdown annual increase of Tier 1 capital. The lower increase of

Tier 1 capital had an impact on the ratio of Tier 1 capital to risk weighted assets to reduce at

15.9 percent form 16.7 percent in December 2015. The capitalization level of Kosovo’s banking

sector remained above the average of 17.2 percent of the region countries (figure 89).

Another indicator to asses the level of

capitalization is the leverage ratio,

which evaluates the coverage level of the

banking sector activity with equity. This

ratio, in 2016, declined slightly at 12.1

percent from 12.2, continuing to stand

above the regulatory requirement of the

minimal level of 7 percent.19 The slight

decline of the leverage ratio was a result

of the slowdown increase of total equity,

which increased by 6.8 percent compared

to the increase of 21.9 percent in the

previous year. While, assets of the sector

were characterized with a similar

increase of 7.8 percent as marked in the previous year. The current level of the leverage is below

the average level of the region countries, which stood at 14.2 percent in December 2016 (figure

89).

Regulatory capital

The value of regulatory capital of the banking sector reached EUR 447.0 million in 2016,

exceeding the minimal capital regulatory requirement for EUR 146.8 million. The quality of

capital, expressed through the share of Tier 1 capital to total regulatory capital, marked an

increase for the third consecutive year mainly as a result of the retained profit from the previous

year. In December 2016, the value of Tier 1 capital totaled EUR 396.7 million, representing an

annual increase of 6.7 percent, whereas its share to total regulatory capital reached 88.7 percent

(figure 90).

19

CBK regulation on Capital Adequacy, Article 9.

15.9%14.1%

15.6%

5.5%

-1.6%

7.3%8.2%

12.3%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

-100

200

500

800

1100

1400

1700

2000

2300

2600


Source: CBK (2017)

Regulatory capital

APR

Annual change of regulatory capital increase (right axis)

Annual change of RWA increase (right axis)

Figure 88. Regulatory capital and RWAs

16.7%

17.8%19.0%

17.9%

9.7%10.8%

12.2% 12.1%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%


Source: CBK (2017)

CAR Tier 1 capital / Risk weighted assets Equity to assets ratio

Figure 87. Banking sector capitalization

16.1%

17.9%

15.7%

21.2%

15.7%15.1%

12.1%11.3%

20.5%

9.7%

0%

5%

10%

15%

20%

25%


Kosovo Macedonia Serbia Albania

Source: CBK (2017)

CAR Financial leverage

Figure 89. CAR in Kosovo’s banking sector and in the region countries (December 2016)


60 |

The structure of Tier 1 capital remained similar to previous periods. Shareholder’s capital

continued to be the dominant category of Tier 1 capital, despite the decline of its share to 69.6

from 73.7 percent as it was in December 2015. The decline of the share of capital was a result of

the increase of the share of retained profit from previous years (figure 91).

The value of Tier 1 capital totaled EUR

50.4 million in December 2016,

corresponding to an annual decline of 3.5

percent. This was mainly a result of the

decline of general provisions held for

loans20 for 7.5 percent and the

subordinated decline of 1.2 percent. The

good financial performance of the sector

in the recent years has enabled banks to

increase their capital through own

resources, namely through retained

profit, which created a possibility for

banks to reduce Tier 2 capital.

Subordinated debt, in December 2016,

decreased to EUR 32.8 million

comprising 65.1 percent of Tier 2 capital

(figure 92). The remainder of 34.9

percent of Tier 2 capital is comprised by

general provisions for loans.

Risk-Weighted assets

RWAs accelerated their annual increase

to 12.3 percent in December 2016 from

8.2 percent in the previous year. Also the

share of risk assets to total assets of the

banking sector21 increased to 68.9

percent in December 2016 (figure 93).

Out of total assets with risk, 91.2 percent are assets with credit risk, while the remainder is

represented by assets dedicated for operational risk management.

20

The value of provisions allocated by banks for loans classified as standard and watch is calculated as part of Tier 2 capital, limited to 1.25% of risk- weighted assets. 21

Here are included also off-balance sheet assets, as the total value of RWA includes off-balance sheet assets.

221.2 231.3273.9 275.9

56.991.9

120.0 144.4

4.7

4.8

6.47.4

0

50

100

150

200

250

300

350

400

450

500


Source: CBK (2017)

Investments in equity & and deferred tax

Lending to a bank-related person

Intangible assets and goodwill

Profit for the current year, retained profit, reserve funds

Capital (shareholder capital, surplus, preferred shares)

Figure 91. Structure of Tier 1 capital

76.5%82.1%

87.7% 88.7%

23.5%17.9%

12.3% 11.3%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


Source: CBK (2017)

Tier 1 capital Tier 2 capital

Figure 90. Structure of regulatory capital

19.0 19.8 19.0 17.6

56.345.7

33.2 32.8

0

10

20

30

40

50

60

70

80


Source: CBK (2017)

General provisions for loans (standard and watch) Subordinated debt

Figure 92. Structure of Tier 2 capital, in millions of EUR

58.3% 60.8% 61.5%68.9%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

110%


Source: CBK (2017)

Credit risk to total RWAs Operational risk to total RWAs

Total RWAs to assets ratio

Figure 93. RWAs to total assets ratio of the sector


| 61

The increase of RWAs came as a result

of the increase of assets with risk weight

of 100% which represent the dominant

category of RWAs with a share of 84.8


The value of these assets, which account

for mortgage and residential loans,

equipment and other core assets and

other real estates, reached EUR 2.1

billion from EUR 1.8 billion in

December 2015. Besides assets with risk

weight of 20% and 75% which marked a

decrease, all other categories of risk

assets have marked an increase during

this period. The decline of assets with a risk of 75% (loans covered with collateral in the form of

mortgages with first priority and loans designated for building real estates), which represents

the second dominant category in the structure of total RWAs after the operational risk, had an

impact on the share of this category to decline to 4.1 percent form 7.8 percent in the previous

year. Despite the trend of other risk categories, they had no significant change in their share.

6.4.4 Market risk

Exposure of the banking sector to market risk, which implies the exposure to the risk of

oscillations in currency exchange rates and movements in interest rates, continued to remain at

low level. The ratio of net aggregated opened position in foreign currency to Tier 1 capital

increased to 4.6 percent from 1.9 percent in December 2015, albeit continues to be classified as a

low level. Loans in foreign currency further declined their share, 0.2 percent in December 2016,

to total credit portfolio, which decreases more the exposure to currency risk.

Loans and deposits continued to have almost entirely fixed interest rates, being impacted by

interest rate movements only in maturity. The negative gap between assets and liabilities

sensitive to interest rates for the short-term maturity of “up to 30 days” narrowed, reducing the

exposure to possible increase of interest rates which will reflect more in expenses of refinancing

than in reinvestment income. On the contrary, positive cumulative gap for the period up to 1 year

was doubled, which represents a higher

exposure to the risk of possible decline of

interest rate.

Currency exchange risk

Net opened position in foreign currency

was increased during 2016 compared to

the same period of the previous year.

This came as a consequence of the

increase of assets in foreign currency to

EUR 145.5 million from EUR 132.9

million equivalent value. Also, liabilities

in foreign currency increased to EUR

139.4 million from EUR 138.2 million equivalent value as it was in December 2015. Assets in

foreign currency in December 2016 were higher than liabilities in two major currencies (US

dollar and British pound), unlike the previous period when liabilities were higher than assets.

Consequently, a more significant increase of assets than the increase of liabilities in foreign

9.2% 9.1% 9.4% 8.8%

15.2% 9.1% 7.8% 4.1%

72.4%78.1%

80.5%84.8%

0%

20%

40%

60%

80%

100%


Source: CBK (2017)

Weight 150 % Weight 20% Operational risk Weight 50 % Weight 75% Weight 100 %

Figure 94. RWA structure by risk weight

-0.2%

1.1%

-0.9%

1.1%

-0.7%-0.3%

1.9%

4.6%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

December 2015 December 2016

Source: CBK (2017)

US$ UK£ CHF Other Net aggregated opened position/Tier 1 capital

Figure 95. Opened positions in foreign currency to tier 1 capital


62 |

currency made net opened position reach the positive value of EUR 6.1 million equivalent value

from EUR -5.3 million in December 2015. The positive net opened position in foreign currency

implies that possible changes in currency exchanges will be reflected more in assets side, where

the effect of currency depreciation in which assets are denominated would be negative, since the

value of these assets equivalent in EUR would result lower.

On the other hand, net aggregated position opened for all currencies22 increased to EUR 18.4

million equivalent value in December 2016, from EUR 7.2 million in the same period of the

previous year. A more significant increase of aggregated position in foreign currency than the

increase of Tier 1 capital of the banking sector during this period made their ratio increase at 4.6

percent from 1.9 percent as it was in December 2015, which however shows a low sensitivity level

of the sector to changes in exchange rates (figure 95).

As regards to specific currencies, net disaggregated position to Tier 1 capital was similar for the

British pound at 1.1 percent (from -0.9 percent in December 2015) and for the US dollar this ratio

increased to 1.1 percent (from -0.2 percent in December 2015). Meanwhile, for the Swiss franc

this ratio changed direction from 0 percent to -0.7 percent in December 2016. The ratio of net

opened position for each single currency to Tier 1 capital continued to remain quite below the

maximum level of 15 percent as required by the regulation.

Lending in foreign currency continued to

be at a quite low level and even has

marked a further decline. In December

2016 the value of total loans in non-euro

currency was EUR 4.2 million equivalent

value, compared to EUR 5.9 million

equivalent value in the previous year.

The increase of lending in EUR currency

and the decline of lending in non-euro

currency made the ratio of loans in non-

euro to total credit portfolio to slightly

decline at 0.2 percent.

On the other hand, the value of deposits

in foreign currency totaled EUR 128.9 million from EUR 124.3 million equivalent value in

December 2015. However, the share of non-euro deposits to total deposits declined to 4.4 percent

from 4.6 in December 2015, as a result of the higher increased rate of total deposits. Conversely,

the decline of loans in non-euro currency against the increase of deposits in non-euro currency

made the ratio of loans in non-euro currency to deposits in non-euro currency to decline at 3.3


The risk of interest rates

Kosovo’s banking sector continued to be exposed to the risk of interest rates only in the context of

the risk of refinancing and reinvestment of assets, considering that loans and deposits by their

historic trend have mainly fixed interest rates and are not impacted by interest rates movements

until maturity. However, oscillations in interest rates may have an impact on the sustainability

of the banking sector when taking into account the risk of refinancing and reinvestment of

assets, depending on the composition of maturity of assets and liabilities which bear interest

(figure 97, and the movement direction of interest rate.

22

Aggregated net opened position accounts for the amount of long and short positions in all currencies. For instance, a short net position (-) in dollars equivalent to EUR

1 million and a net long position (+) in Swiss francs with a value of EUR 1 million equivalent results in aggregated net posi tion of EUR 2 million, while net opened position

would be 0.

0.3% 0.3% 0.3% 0.2%

5.6%

4.5%4.6%

4.4%

4.4% 5.3%4.7%

3.3%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%


Source: CBK (2017)

The share of foreign currency loans to total credit portfolio

The share of deposits in foreign currency to total deposits

Loans in foreign currency against deposits in foreign currency

Figure 96. Loans and deposits in foreign currency


| 63

The gap between assets and liabilities that bear interest is negative only for the category of

maturity “up to 30 days”, which exposes the sector to possible increase of interest rate in short-

term basis, since the cost of refinancing from deposits would increase higher than the income

from the reinvestment of assets may

increase. In December 2016, the

negative gap for this interval of maturity

was narrowed to 204.6 from EUR 378.2

million in the previous year, decreasing

the exposure of the sector to this risk.

While, the cumulative gap for the

maturity “up to 1 year” is positive and

was doubled amounting to EUR 716.6

million from EUR 337.5 million. This

increases the exposure of the sector to

possible decline of interest rate since

interest income of the sector are affected

more than interest expenses.

For all other maturities beside “1 to 5 years” maturity, the gap of assets and liabilities that bear

interest is more expanded compared to previous year. The gap for the maturity “1 to 5 years”

narrowed, whose value declined at EUR 746.0 million. While the cumulative gap between assets

and liabilities for all maturities reached EUR 1.5 billion from EUR 1.2 billion as it was in

December 2015. The shift of time deposits to transferable deposits in one hand and the

accelerated increase of lending on the other hand, had an impact on expanding the positive

cumulative gap between assets and liabilities.

Stress test results suggest that the sector is able to withstand possible scenarios of the decline of

interest rates on assets and the increase of interest rates on liabilities, despite the negative effect

that these developments would have on the income of the sector.

Box 2. Identification of banks with systemic importance in Kosovo

The model for identifying banks with systemic importance represents an important tool for a continuous

assessment of the scale of systemic importance of commercial banks in Kosovo. A bank is considered to

have a systemic importance if its possible failure is expected to be manifested with a negative severe

functions and stability of the whole sector and in the economy on general. Therefore, the continuous

monitoring of the systemic importance is considered to have a special importance for the financial stability.

The model as well enables drafting of recommendations for policies and needed measures for ensuring

appropriate absorbing capacities of possible losses of banks in compliance with their systemic importance

scale, thus serving in maintaining the financial stability in the country.

This box represents the assessment of the systemic importance for all banks and branches of foreign banks

operating in Kosovo based on data as of December 2016 of the balance sheets of the appropriate banks. The

model is relied on instructions issued by EBA (2014) according to which are defined four basic criteria for

assessing the systemic importance of banks: criteria of size, substitutability, interconnectedness, and

interstate/complexity activity. All four criteria were given equal weight and for each of the criteria were

defined specific indicators through which it is measured the systemic importance of individual banks (table

7). The selection of the indicators was applied in compliance with certain theories and suggestions of the

framework up on which was developed the model.

A bank is considered with a systemic general importance if the average of all criteria for the appropriate

banks exceeds the borderline of the systemic importance. The systemic importance line is calculated as an

average of the sector for all criteria. Also for other certain criteria, a bank is identified with systemic

-600

-400

-200

0

200

400

600

800

1000

1-30 days 31-90 days 91-365 days 1-5 years Over 5 years

Source: CBK (2017)


Figure 97. Assets and liabilities gap sensitive to interest rates, in millions of EUR


64 |

importance if the weighted average of one criteria for the appropriate bank exceeds the average of the sector

in this criteria. The borderline of the systemic importance for Kosovo’s case results to be 1,000 base points,

and banks which have the average higher then this limit are considered banks with systemic importance.

Table 7. Indicators used to assess the systemic importance of banks in Kosovo

Source: CBK (2017)

Below it is presented the description of

criteria and the way of measuring them:

Criteria of size, is considered a very

important criteria in measuring systemic

importance of an institution, as the higher

the share of a bank to the sector is, the more

significant its systemic importance is. This

because parties affected by the shock of the

bank are more comprehensive and costs for

the whole sector and the economy are larger.

The criteria of size is measured as a ratio of

assets of each institution to total assets of

the sector.

Criteria of substitutability measures the

substitutability scale of the products and

services offered by the appropriate bank by

other banks in the market, in case that bank

fails. Substitutability criteria presents

another important criteria in measuring

systemic importance of banks. The higher the

share of a bank is in a certain segment of the

market or in offering a certain service, the

higher are technical capacities and

knowledge for the functioning of the

appropriate sector (e.g. of the payment

system), which make it more difficult the

substitution of its role in offering these

banking services. Therefore, also the systemic

importance of one institution increases when the difficulties are higher for substituting the offered services

and products of that bank.

Criteria of interconnectedness aims to measure the interconnectedness among banking

institutions and other financial institutions in the country in order to identify the risk of the

spill-over effect of crisis of one institution to other financial institutions and to the real sector.

This criteria is of utmost importance for measuring the systemic risk in countries with developed financial

Criteria Indicators

Value of transactions to total transactions value ratio of the sector through payment system

The share to total loans to households

The share to total loans to nonfinancial corporations

The share to total household deposits

The share to total loans to other f inancial corporations and placements in other banks (excluding parent banks)

The share to total f inancial corporation deposits and other borrow ings (including also deposits of other banks)

The share in securities

Claims to external sector

Liabilities to external sector

The share of off-balance items

Interstate activity and

complexity (weight 25%)

Size

(weight 25%)Assets (w ithout provisions)

Substitutability

(weight 25%)

Interconnectedness

(weight 25%)

0

500

1,000

1,500

2,000

2,500

3,000

A B C D E F G H I J

Source: CBK (2017)

Overall systemic importance Borderline of systemic risk

Figure 98. General scale of systemic importance

0

500

1,000

1,500

2,000

2,500

3,000

A B C D E F G H I J

Source: CBK (2017)

General scale of systemic importance Borderline of systemic risk

Figure 99. Criteria of size


| 65

sectors where interconnectedness among the institutions is high and complex. Kosovo’s inter-banking

market is at quite low level of its activity and interconnectedness between financial institutions mainly are

limited in deposits and loans that other

financial institutions as insurance

companies, microfinance institutions and

other financial auxiliaries have in

commercial banks in Kosovo. Consequently,

the interconnectedness of financial

institutions is measured through the share of

placements in other banks and credit

exposure to other financial corporations, and

the share of deposits and borrowings from

other financial corporations. In this criteria

are included also investments in securities of

banks, which are mainly comprised of

Kosovo’s Government securities investments

and other foreign governments.

Criteria of inter-state activity and

complexity measures the interactivity scale

of one bank with external sector in the

context of assets and liabilities as well and,

the scale of complexity of the business model

and operations of a bank. This criteria aims

to present the risk level of a bank against its

exposure to external sector and the risk level

under the assumption that the higher the

complexity of a bank is, the higher are

interconnectedness and agreements with

third parties, which increase costs and time

for addressing problems in case of failure.

Kosovo continued to have quite low level of

banking interconnectedness with other countries, therefore is more resistant to possible risks which come

from the external sector. As an indicator for measuring the inter-state activity were taken into account

claims and liabilities to nonresidents whereas as an approximate indicator for measuring the complexity of

a bank were taken into consideration the off-balance sheet items to total assets portfolio of that bank.

Results

General results of the model, based on the data of December 2016, suggest that five banks are

with systemic general importance (figure 98). Two out of these banks resulted to have systemic

importance in all criteria. Results also show that two banks which are not with general systemic importance

have resulted with systemic importance in interconnectedness criteria. The general scale of systemic

importance ranges between 1,000 base points to 2,432 base points. However, in 2016, it was marked a slight

decline of the weight of banks with general systemic importance, as a result of including in the analysis also

another bank which until now was not included. Nevertheless, banks which have no systemic importance

are showing potential to increase their share in the general banking activity. Results of the model in general

suggest that the decline of the scale of systemic importance was observed in the criteria of size and

substitutability. This is a result of the increased number of banks in the analysis and the decline of banks

with systemic importance to nonfinancial institutions.

0

500

1,000

1,500

2,000

2,500

3,000

A B C D E F G H I J

Source: CBK (2017)


Figure 100. Criteria of substitutability

0

500

1,000

1,500

2,000

2,500

3,000

A B C D E F G H I J

Source: CBK (2017)


Figure 101. Interconnectedness criteria


66 |

Criteria of size - four banks, which have

a general systemic importance, resulted

with a systemic importance in criteria of

size (figure 99). The scale of systemic

importance in this criteria ranges from 1,239

base points to 2,485 base points, representing

a decline compared to previous year. The

decline was mainly a result of the inclusion of

an additional bank which was not included in

the previous year because it was considered

still on the initial phase of its activity. Also

banks which do not have systemic

importance have accelerated their activity,

more specifically their credit activity, by

increasing the share of assets compared to

previous year. Criteria of substitutability - with a systemic importance of substitutability resulted to be four

banks that have general systemic importance. The scale of systemic importance in this criteria in 2016

ranged from 1,495 base points to 2,333 base points (figure 100). Also in this criteria, the scale of systemic

importance marked a decline compared to previous year as a result of the decline of lending to enterprises

from banks with higher share of lending for this sector along with the increase of lending of banks with

lower share, which are not considered with general systemic importance.

Interconnectedness criteria - with systemic importance in the criteria of interconnectedness resulted four

banks with general systemic importance and two other banks which are not considered with general

systemic importance. The scale of systemic importance in this criteria ranged from 1,002 base points to

2,058 base points (figure 101). Compared to the previous year, the scale of systemic importance was

increased as a result of the increase of investments in securities and the increase of lending of one banks

with systemic importance to other financial institutions.

Criteria of inter-state and complexity activity - Four out of five banks with general systemic

importance have resulted to be with systemic importance in criteria of inter-state activity. The

scale of systemic importance in this criteria ranged from 1,009 base points to 2,852 base points (figure 102).

Compared to the previous year, the scale of systemic importance was increased as a result of the increase of

liabilities of banks with systemic importance to the external sector. Also, banks with general systemic

importance marked a significant increase of off-balance assets thus having an impact on the increase of the

complexity scale.

6.5. Stress-test analysis

Stress-test analysis present an important tool to assess the sustainability of the banking sector to

possible shocks in credit portfolio and the position of liquidity, which may follow unfavorable

macroeconomic developments and changes in market conditions. Through this analysis it is

assessed the impact of these shocks in the quality of credit portfolio, on the level of capitalization

and on the position of liquidity.

The analysis presented below is based on the data of the banking sector of Kosovo for 2016,

which were used to assess the sustainability of the sector to credit risk, combined with the risk

from interest rates and the risk from currency exchange rate (market risk). In the analysis it was

tested also the ability of the sector to maintain the liquidity position under the hypothetic

assumption of considerable deposits withdrawals (liquidity risk).

The results of stress-test analysis continuously suggest satisfactory capability of banks to face

“extreme situation” of the exposure to these risks.

0

500

1,000

1,500

2,000

2,500

3,000

A B C D E F G H I J

Source: CBK (2017)


Figure 102. Criteria of interstate activity and complexity


| 67

6.5.1 Sustainability assessment of the banking sector to loans portfolio shocks

Methodology

Baseline scenario: The analysis is based on the hypothetic scenario when the economic

situation in euro area and in the region will be deteriorated, reflecting Kosovo’s economy mainly

through the decline of remittances and exports, thus discouraging the general demand in the

country. As a result, it is supposed to be marked an economic decline, which expands the

negative output gap and has an impact on the increase of nonperforming loans. In this scenario it

was taken into account an average economic growth rate of 3.2 percent in Kosovo in six recent

years, and it was supposed an economic decline of 2.6 percent in 2017. In this situation, the

negative output gap would be 5.8 percent, while the impact on the credit portfolio quality, namely

on nonperforming loans, it was assessed by considering an elasticity coefficient of NPL to output

gap of 0.8,23 implying an increase of 4.6 percentage points of NPL to total loans of the banking

sector. As a consequence of the shocks in the real sector, it was supposed that lending would not

increase in the following year.

In an additional scenario besides the baseline scenario, along with credit risk, were considered

also the effects of the market risk in the income of the sector. Therefore, credit risk was combined

with the risk of interest rate and with the exchange rate risk. The interest rate for the part of

assets were supposed to decline for 2.0pp, while for the part of liabilities interest rates would

increase for 1.5pp mainly as a result of the banking competition. Depreciation of EUR currency to

other currencies was supposed to be 20 percent.

The effects of the above assumption of the banking sector reflects as follows: the increase of the

share of NPL to total loans has an impact on the increase of provisions; depreciation of EUR

affects the revaluation of loss/profit from net opened position, and the change of interest rates

has an impact on the loss/profit of net income from interest taking into account the maturity of

assets and liabilities and their reinvestment/refinancing.

Besides these assumptions, it was taken into account the expected profit as a loss absorption of

these shocks. In this context, it was assumed that the profit, as well, would be impacted by above

mentioned shocks, mainly through the decline of ability to generate interest income as a result of

no increase of lending activity and failure of loans (NPL increase). Therefore, the expected profit

of banks for the following year was calculated taking into account the net profit after the tax

realized in 2016, to which initially was applied a shock of 40 percent to reflect the effect of no

increase of lending activity, and after that were deducted also the income which would be

realized if NPLs would not mark an increase.24

The assumed increase of NPL was expressed through migration of loans from performing

category (standard, watch, sub-standard) towards nonperforming category (doubtful and loss).

This increase was spread proportionally within the category of doubtful loans and loss loans,

taking into account the initial share of these categories to total NPL. The increase of NPL

reflects on the level of provisions based on the CBK regulation regarding loans provisioning by

classification. The assumption on NPL increase is applied on off-balance items which include

unused commitments, guarantees, available credit notes, and commercial credit notes.

Despite the fact that to the additional scenario was considered the depreciation of EUR against

foreign currencies to assess the risk of exchange rate, it is important to emphasize that the

impact of this risk on the balance sheet of banking sector continued to have minor effects due to

the low value of net opened positions in foreign currency.

23

Unpublished IMF research paper, "CESE Bank Loss Projection and Stress Testing Exercise", July 2009. 24

Assessment of 'lost' income as a result of the NPL increase was initially made by calculating ex-post rate of the overall interest rate on loans for each bank, which was

then multiplied by the added value of NPL.


68 |

The scenario on the risk from interest rate implies the decline of interest rates of 2pp for

assets25and the increase of 1.5pp for liabilities on the balance sheet. The interest rate decline

may have an impact on the net interest margin , mainly taking into account the maturity of loans

and deposits since the majority of loans and deposits of the Kosovo’s banking sector have fixed

interest rates and changes in interest rates are not reflected until maturity. The negative effect

on income from the decline of interest rate on the side of assets is further emphasized by the

negative effect that has the increase of interest rate of liabilities.

Other additional scenarios: Along with the above base mentioned scenarios, additional

scenarios in the analysis on credit risk were considered also the failure of largest borrowers in

each of the banks, and the capable level of NPL for each of the bank before problems with

capitalization would appear.

Finally, the sustainability of the banking sector in this analysis was assessed taking into account

the impact of hypothetic scenarios on the level of regulatory capital of the banking sector, risk-

weighted assets and consequently, capital adequacy ratio.

Results

The state of Kosovo’s banking sector as regards to capitalization in 2016 was quite favorable,

with the capital adequacy ratio standing at 17.9 percent26 (table 8). The banking sector continued

to stand at good position regarding the nonperforming loans to total loans ratio, with 4.9 percent

of NPL rate, and the coverage rate of nonperforming loans with loan loss provisions which

reached 126.5 percent.

Table 8. Summary of stress-test results: credit risk

Note: 1/ out of ten banks considered in the stress-test analysis, the number of banks which falls under the required regulatory level, broken-down by categories. Note: 2/ In reporting the minimum and the maximum values of indicators on the level of banks, in some cases were excluded the high values of CAR and the NPL rate of 0 percent, with which are characterized banks in the beginning of their activity.

Source: CBK (2017)

Baseline scenario: Under the assumptions of the base scenario to assess the credit risk

(including also the off-balance items), in which the share of NPL to credit portfolio would

increase for 4.6pp, while the retained profit after the shock would be used to absorb losses, CAR

of the banking sector would decrease to 16.9 percent (compared to the minimum level of 12

percent as required by the CBK regulation). The total loss of the banking sector would reach the

value of EUR 62.4 million (1.0 percent of the value of GDP in 2016). However, the whole amount

of this value can not be considered as a loss of the sector taking into account that a large amount

of this loss would be absorbed by the realized profit. Also, a part of the losses is assumed to be

compensated by realization of the collateral or by restructuring loans, albeit this aspect was not

taken into account in this analysis.

On the level of individual banks, only one bank would face with capitalization problems, where

CAR would decline at 6.7 percent, which is below the regulatory minimum and additional needed

25

The interest rate on loans declined at an average of 1.3pp in 5 recent years. 26

In this analysis were involved ten banks operating in Kosovo.

CAR

<0

CAR

0-8%

CAR

8-12% Low er level Higher level Sector level Low er level Higher level Sector level

In thousands

EUR

As % to

GDP

Current levels (prior to shocks) 0 0 1 10.5% 20.5% 17.9% 3.0% 6.6% 4.9%

Results of macro scenarios

Base scenario 0 1 0 6.7% 19.1% 16.9% 4.6% 11.3% 9.6% 12,988.06 0.22%

Combination of market risk 0 1 1 5.7% 18.1% 15.6% 4.6% 11.3% 9.6% 15,820.27 0.26%

Failure of three borrow ers 1 0 0 -9.2% 23.1% 15.2% 1.0% 33.5% 12.1% 52,072.32 0.87%

Failure of f ive borrow ers 1 0 1 -15.5% 23.1% 13.1% 1.0% 41.5% 14.5% 85,191.68 1.42%

Description

Number of banks 1/ CAR NPL Recapitalization 2/


| 69

assets for increasing the capital at the minimum required capital would amount to EUR 12.99

million.

In general, under the assumption of base scenario for assessing the credit risk, banking sector

would face an increase of 4.6pp of NPL without risking the capability of banks to fulfill the

requirements of capital adequacy ratio as set by the CBK. In these circumstances, the share of

NPL to total loans of the banking sector after the shock would reach 9.6 percent, while on the

level of individual banks, the highest level of NPL would reach 11.3 percent.

Additional scenarios: Results of additional scenario, in which the credit risk is combined with

the market risk, where besides the 4.6pp increase of NPL is included also the depreciation of

EUR and interest rates oscillations in the above assumed levels, CAR of the banking sector

would decline at 15.6 percent. In this case, two banks would decline below the minimum required

level of CAR of 12 percent, and the needs for recapitalization would amount EUR 15.8 million

(0.26 percent of the real value of GDP for 2016). In this scenario, the effect of EUR depreciation

on the income of the sector is presented at low but positive level due to the net opened position

that the sector had in December 2016. This means that banks have more assets denominated in

currency than liabilities, and the possible depreciation of EUR to other currencies would bring

higher income since the net equivalent value in EUR would result higher. While the impact of

interest rate decline on the income of the sector and the increase of interest rate on expenses will

be negative and very high. However, despite additional losses from changes in market conditions

- resulting in a change of interest rates, banking sector, though, results to be stable with a

capitalization level over 12 percent.

Another additional scenario assumes the failure of large credit exposures. Results of the scenario

in which it is assumed the failure of the three largest borrowers in each of the banks, suggests

that CAR of the sector would drop to 15.2 percent. In these circumstances, in one of the banks

CAR would decline below the minimal required level of 12 percent, and further more would fall

into e negative territory. This would require EUR 52.07 million (equivalent value of 0.87 percent

of the real value of GDP) additional needed assets for increasing the capital at the minimal

required level. Under the assumption of the failure of five largest borrowers in each of the banks,

CAR of the sector would decline at 13.1 percent, and two of the banks would result under

capitalized. The needed amount for recapitalization would reach EUR 85.19 million (an

equivalent value of 1.42 percent of the real value of GDP in 2016).

Banking sector is able to face an NPL ratio to total loans up to 15.4 percent without having a

need for additional capital injection in order to keep CAR of the sector at the required regulatory

level of 12 percent. Also, the capable level of NPL for each of the bank before capitalization

problems would appear is very high for the majority of banks. There is only one bank that would

successfully face an NPL rate of only 4.5 percent before becoming under capitalized. In one of the

banks NPL would increase up to 19.3 percent of total credit portfolio of that bank before needing

additional capital.

6.5.2. Sustainability assessment of the banking sector against liquidity shocks

Methodology

Baseline scenario: The analysis of the banking sector sustainability against the liquidity

position is relied on baseline scenario of withdrawing a significant value of deposits from the

banking sector, thus assessing the ability of the sector to face with such a shock. More

specifically, it was considered an 8 percent withdrawal of deposits on daily basis, for five

consecutive days, allocating 5 percent of remained deposits after each day for the purpose of

banking operations in the following days. The allocation of 5 percent of deposits for operational


70 |

purposes, which under the assumed scenarios, the obligatory reserve of 10 percent would

decrease for 50 percent. The scenario was also build under the assumption that during this

period the possibility of converting liquid assets into cash would be 80 percent of total liquid

assets, while the possibility of converting non-liquid assets in cash would only reach 1 percent of

these assets within a day. The scenario in which this analysis is based is quite conservative also

due to the fact that it was not taken into account the ability of banks to fulfill part of their

liquidity needs through their external financing sources.

Additional scenarios: Along with the above mentioned scenario, additional scenarios in the

analysis on credit risk were considered also the failure of the largest borrowers in each of the

banks, and the capable level of NPL for each of the bank before problems with capitalization

would appear.

As a conclusion, the banking sector sustainability in this analysis was tested by assessing the

adequacy of liquid assets of the banks to face with large deposit withdrawals and the adequacy of

liquid assets in order to face possible risks from deposits concentration.

Results

Kosovo’s banking sector was characterized with liquidity level in 2016, where the key liquidity

indicator (liquid assets to short-term liabilities ratio) stood at 41.5 percent Therefore, as a result

of the good liquidity position, the whole banking sector showed satisfactory ability of facing with

assumed scenarios of deposit withdrawals.

Table 9. Summary of stress-test results: liquidity risk

Note: 1/ out of ten banks considered in the stress-test analysis, the number of banks which fall under the required regulatory level, broken-down by sectors

Source: CBK (2017)

The baseline scenario results of withdrawing 8 percent of deposits within a day, for five

consecutive days, suggest that Kosovo’s banking sector would begin to have needs for additional

liquidity only in the fourth day, where two of the banks would lack an amount of EUR 11.65

million of liquid assets (table 9). At the end of the fifth day, problems would appear also in

another bank, thus increasing to three the number of banks which would have a lack of liquid

assets for facing with assumed deposit withdrawals. The scale of total deposit withdrawals in

the fifth day would rise to 34.1 percent, and the amount of additional liquid assets needed for

successfully overcoming liquidity problems would amount to EUR 40.52 million (0.67 percent of

the GDP real value in 2016).

The failure assumption of large depositors in each of the bank results to be not of a concern for

the general liquidity statement of the banking sector. Results of this scenario suggest that

Kosovo’s banking sector has no significant concentration of financing sources (deposits as the

main source of liabilities). Only one of the banks would have liquidity problems where the

amount of additional liquid assets needed for overcoming liquidity problems would reach EUR

22.3 million. Therefore, the immediate withdrawal of large depositors in each of the bank does

After the first day 0 - 83.4% 0.00%

After second day 0 - 90.7% 0.00%

After third day 0 - 98.5% 0.00%

After fourth day 2 11,653.53 107.1% 0.19%

After f ifth day 3 40,522.82 116.4% 0.67%

Description Number of banks 1/ Additional needed liquid

assets (in thousands of EUR)

Additional needed liquid

assets as % to GDPLoans/Deposits


| 71

not present serious risk for the general liquidity position of the banking sector which is quite

liquid.

The acceptable level of deposits withdrawal for the whole banking sector before liquidity

problems would appear results to be 27.4 percent, implying that the banking sector may be able

to face the withdrawal of one third (1/3) of total deposits without having a need for liquid assets.

In this case, under the assumption that loans value would not increase, loans-to-deposits ratio for

the banking sector would reach 105.7 percent. Also, the capable level of withdrawing deposits for

each of the bank before liquidity problems would appear is very high in general. The bank with

the lowest threshold stands at 16.9 percent, whereas the one with the highest threshold stands at

50.5 percent.

6.6. Financial infrastructure in Kosovo

6.6.1. Payments system

Payments system has an important role in the financial system of a country’s economy, taking

into account that its efficient and safe operation represents a very important factor in

maintaining and promoting financial stability. In Kosovo there is only one payment system for

interbank payments, Interbank Payment System (IPS), operated and supervised by Central

Bank of the Republic of Kosovo (CBK).

One of the important steps that the CBK has taken during this year, in the field of payment

system, is the implementation of the entire new interbank payment system, namely Automate

Transfer System (ATS). This system which has substituted the Electronic Interbank Clearing

System (EICS), is comprised by two components which will enable the transfer of funds in real

time (the component RTGS, Real Time Gross Settlement) and processing of payments in group

and small amounts (the component ACH - Automated Clearing House).

The number of transactions processed by Automated Transfer System in 2016 totaled 11.6

million (9.8 million in 2015), marking an annual increase of 17.9 percent. While, in the same

period, the total value of transactions reached euro EUR 10.7 billion (7.5 billion in 2015),

representing an annual increase of 42.5 percent. Priority massive payments represent the

category with the highest share in the number of realized interbank transactions (table 10).

These payments represent 4.7 million realized transactions (or 40.4 percent of total number of

transactions) and are mainly payments from governmental institutions (such as wages and

pensions). After that come regular massive payments, which represent 4.1 million realized

payments (or 35.2 percent of total number of transactions) and are mainly payments received by

governmental institutions and account for tax payments, fees, customs etc., while 1.4 million are

comprised of Giro payments mainly being composed by public utilities (bills of public utility

companies, governmental institutions such as Customs Services and Kosovo Agency of Property)

(table 10).

Regarding the value of transaction regular payments (credit transfers under EUR 10 thousands

which are initiated in bank branches with the payment order of the payer),27 reached the value of

EUR 2.42 billion.

The number of total valid bank accounts28 in December 2016 was 1.88 million, representing an

annual decline of 0.6 percent compared to the previous year.

27

Regular payments do not have high priority and are processed through sessions defined by the CBK. They are initiated at a branch of a bank by the payer through a

payment in a form of a paper and this payment order is processed by the central system of the commercial bank and is sent for clearance at IPS. The payer either pays in

cash or through his bank account. 28

The number of total bank accounts comprises: the number of current accounts, saving and other accounts at a bank.


72 |

Table 10. The share of payment instruments to total IPS transactions, in percent

Source: CBK (2017)

E-banking accounts, by which are processed banking services on-line, have steadily been

increasing. In December 2016 the number of e-banking accounts reached 230.9 thousands, thus

marking an annual increase of 23.3 percent (table 11). Also, the volume of transactions processed

through E-banking increased.

Table 11. Banking sector network

Source: CBK (2017)

The number of total realized transactions through E-banking accounts, in 2016, reached 2.92

million, corresponding to an annual increase of 26.4 percent, while the value of total transactions

realized through E-banking accounts reached EUR 6.70 billion presenting an annual increase of

16.5 percent.

The structure of E-banking accounts continued to be dominated by resident accounts with a

share of 97.9 percent. Within the resident accounts, individual bank accounts comprise 79.7

percent of total accounts while the remainder of 20.3 percent consists of business accounts.

Similarly, the structure of nonresident accounts is dominated by individual accounts with a share

of 91.5 percent, while the remainder of 8.5 percent is comprised by business accounts.

The number of total accounts (credit and debit cards) which offer services for cash withdrawals

and other payments increased by 17.5 percent in December 2016. The number of debit cards

reached 856,718 while the number of credit cards reached 156,437. The number of debit cards

was characterized with an annual increase of 19.2 percent, while credit cards marked an annual

increase of 8.7 percent. The highest share within debit and credit cards, in December 2016, was

marked by Visa cards (77.3 percent and 87.2 percent, respectively), followed by Master Cards

(20.4 percent and 12.0 percent, respectively).

Banking infrastructure in the country was expanded in the context of the increase of Points of

Sales (POS), while the number of Automated Teller Machines (ATM) decreased compared to

December 2015 (table 11). Despite the decrease of ATM number, the number of withdrawals

through them increased to 12.3 million (10.4 million until December 2015), with an amount of

EUR 1.62 billion (1.22 billion until December 2015) (table 12). Consequently, the value of cash

2015 2016 2015 2016

Regular 12.3% 11.2% 49.2% 22.7%

Prioritized 0.3% 0.6% 9.5% 21.0%

Regular-massive 38.3% 35.2% 8.0% 6.2%

Prioritized-massive 35.2% 40.4% 9.5% 7.9%

Giro payments 13.7% 12.2% 14.0% 10.8%

Securities 0.0% 0.0% 9.7% 8.5%

Direct debiting 0.2% 0.2% 0.1% 0.1%

Bank-Bank 0.0% 22.8%

DescriptionNumber of total transactions Value of total transactions


Number of bank branches 44 45 45 45

Number of bank sub-branches 245 223 210 207

ATM number 496 498 540 522

POS number 9,071 9,349 9,705 10,589

Number of E-banking accounts 131,365 157,761 187,297 230,905


| 73

withdrawals through ATM to total card transactions reached 63.4 percent in 2016, showing a

high level of cash use.

Table 12. The share of card transactions value by terminals to total value of card transactions, in percent

Source: CBK (2017)

The increase of ATM number, which enable depositing of cash into clients accounts, has had an

effect on the depositing value to increase its share to 26.5 percent to total value of card

transactions through terminals, from 10.5 percent as it was in 2015.

At the same time, the number of payments through points of sales using cards at POSs reached

6.8 million with an amount of EUR 252.2 million. The value of payments through POSs to total

transactions by cards reached 9.9 percent (table 12).


ATM w ithdraw als in cash 81.0% 78.9% 70.8% 63.4%

ATM deposits 0.2% 1.1% 10.5% 26.5%

Credit transfers through ATMs 0.1% 0.0% 0.0% 0.0%

POS cash w ithdraw als 2.1% 1.1% 1.2% 0.3%

Card payments through POS 16.6% 18.9% 17.5% 9.9%


74 |

7. Pension Sector

The value of assets of the banking sector in 2016 totaled EUR 1.43 billion, corresponding to an

annual growth of 15.2 percent (figure 103). Kosovo Pension Saving Fund (KPSF) represents the

largest share of assets of the sector (99.5 percent), while the remainder is managed by Slovenian-

Kosovar Pension Fund (SKPF) (table 13).

Table 13. Structure of pension sector

Source: CBK (2017)

KPSF assets amounted to EUR 1.42

billion, corresponding to an accelerated

annual growth of 15.2 percent (13.1

percent in 2015). In 2016, new

collections marked an annual increase of

10.2 percent, while their value reached

EUR 151.5 million (figure 104).

Structure of assets of KPSF continued to

be dominated by investments in external

markets, which are mainly held in the

form of shares and treasury bills of

foreign governments. In 2016, it was

observed an increase of KPSF

investments abroad, while investments in Kosovo declined, which may be attributed to higher

returns realized by investments abroad. Investments abroad marked an increase of their share

with 91.9 percent (88.1 percent in 2015), while investments in Kosovo declined their share at 8.1

percent (11.9 percent in 2015) (figure 105).

In 2016, the total value of SKPF assets reached EUR 6.4 million, marking a slight annual

increase of 6.4 percent (3.7 percent in 2015). New collections reached a value of EUR 496.5

thousands in the reporting period, corresponding to an annual increase of 7.6 percent (1.8 percent

in 2015) (figure 104).

Description December 2012 December 2013 December 2014 December 2015 December 2016

Kosovo 99.3% 99.4% 99.4% 99.5% 99.5%

Slovenian-Kosovo 0.7% 0.6% 0.6% 0.5% 0.5%

119.2128.7

137.5

151.5

0.39 0.45 0.46 0.50

0102030405060708090

100110120130140150


In m

illi

on

s o

f E

UR

Source: CBK (2017)

New collections of KPSF New collections of SKPF

Figure 104. Contributions collected by pension funds

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

In the country Abroad In the country Abroad

KPSF SKPF

Source: CBK (2017)


Figure 105. Structure of pension sector investments, in percent

23.3%

19.1%

13.1%

15.2%

0%

5%

10%

15%

20%

25%

0

200

400

600

800

1,000

1,200

1,400

1,600


In p

erc

en

t

In m

illio

ns o

f E

UR

Source: CBK (2017)

Total assets Annual growth (right axis)

Figure 103. Assets of pension sector, in millions of EUR


| 75

Also the structure of assets of SKPF is dominated by investments abroad, mainly in the form of

securities, shares and commercial notes, which comprise 82.7 percent of total assets. While,

investments in Kosovo of SKPF total assets have a share of 17.3 percent, representing an

increase of the share comparing to previous year (13.6 percent) (figure 105).

Financial performance of pension

sector

Pension sector marked a positive

financial performance in the second half

of the year, as a result of the positive

return in investments and the increase

of the share price of two pension funds.

Investments return of KPSF in 2016

reached a value of EUR 64.6 million,

which is for EUR 35.0 million higher

than in the previous year. Moreover,

KPSF closed the last day of December

2016 with a higher share price. More

specifically, the share price reached

EUR 1.38, compared to EUR 1.32 in

2015 (figure 106).

Similarly, also SKPF marked positive

return on investments. In 2016, net

return from investments totaled EUR

526.9 thousands, which is significantly

higher than the return registered in the

previous year (EUR 7.81 thousands in

2015). Also, the share price of SKPF in

the last day of December 2016 was

higher than in the previous year,

reaching EURO 158.4 compared to EUR 145.3 in 2015 (figure 107).29

29

The base value of SKPF share price is 100 while KPSF base value of the share price is 1.

1.21

1.29

1.32

1.38

1.10

1.15

1.20

1.25

1.30

1.35

1.40

0

10

20

30

40

50

60

70

80

December 2013 December 2014 December 2015 December 2016In

millio

ns o

f E

UR

Source: CBK (2017)

Investments return Share price, in EUR (right axis)

Figure 106. Financial performance of Kosovo Pension Saving Fund

138.56

145.33

145.33

158.43

125

130

135

140

145

150

155

160

0

100,000

200,000

300,000

400,000

500,000

600,000

December 2013December 2014December 2015December 2016

In t

ho

usan

ds o

f E

UR

Source: CBK (2017)

Investments return Share price, in EUR (right axis)

Figure 107. Financial performance of Slovenian-Kosovo Pension Fund


76 |

8. Insurance Sector

The structure of insurance sector

continued to be dominated by insurance

services of “non-life” insurance,

representing 89.9 percent of assets of the

insurance market, while the remainder is

comprised by assets of “life” insurance. In

the domestic market operate 12

companies which offer products of “non-

life” insurance, while three companies

offer products of “life” insurance.

Companies with foreign ownership

comprise 50.2 percent of total assets,

while domestic companies have a share of

49.8 percent of total assets of insurance

sector. In 2016 it was approved the sale

of one company with foreign ownership

to domestic owners and the opening of a

new company with domestic

shareholders, which was reflected also in

the structure of assets by ownership.

Consequently, in the insurance sector

operate seven companies with domestic

ownership and eight companies with

foreign ownership (figure 108).

The concentration level of the market in

insurance sector may be considered low,

especially comparing the concentration level of the banking market. Expressed through the share

of three largest companies to total assets of insurance sector, the concentration level stood at 35.5

percent in 2016, representing a similar

level as in the previous year.

8.1. Activity of the Insurance Sector

Assets of the insurance sector totaled

EUR 161.8 million, corresponding to an

annual increase of 5.9 percent (figure

109). Assets of “non-life” insurance

companies increased by 5.6 percent,

while assets of “life” insurance” marked

an annual increase of 8.3 percent.

Structure of assets of insurance sector

continued to be dominated by cash and

deposits, categories that were characterized with an increase of the share in this period. From

52.0 percent in 2015, the share of cash and deposits increased to 52.4 percent of total assets in

2016. Conversely, the category of financial assets increased its share to 13.4 percent from 9.4

percent is it was in 2015.

1.5%

5.5%

9.2%

5.9%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

0

20

40

60

80

100

120

140

160

180


In p

erc

en

t

In m

illio

ns o

f E

UR

Source: CBK (2017)

Total assets Annual growth (right axis)

Figure 109. Assets of insurance sector

79.1

82.1 80.0 83.5

38.9

32.336.8

34.3

49.1%

39.4%

46.0%

41.0%

0%

10%

20%

30%

40%

50%

60%

0

10

20

30

40

50

60

70

80

90


In p

erc

en

t

In m

illi

on

s o

f E

UR

Source: CBK (2017)

Received premiums Claims paid Claims/premiums (right axis)

Figure 110. Premiums received and claims paid, in millions of EUR

28.8% 29.8% 27.1%

13.1%

23.6% 22.7% 28.3%49.8%

16.0% 14.3%14.1%

10.0%5.5% 7.3%

7.2% 0.0%

17.9% 17.7% 15.3%27.2%

8.2% 8.2% 8.0%0.0%

Dec 2013 Dec 2014 Dec 2015 Dec 2016

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Austria-Albania Kosovo Slovenia Croatia Albania Turkey

Figure 108. Structure of assets of insurance sector, by ownership

Source: CBK (2017)


| 77

Within liabilities and own resources,

technical reserves dominate the general

structure with a share of 74.6 percent,

while the remainder is comprised by

own capital, other liabilities and loans.

Technical reserves marked a significant

annual increase of 30.4 percent. On the

other hand, own capital marked a

decline of 39.2 percent, mainly being

impacted by the loss of insurance

companies.

The value of total written premiums of

the sector in 2016 reached EUR 83.5

million, representing an annual increase

of 4.4 percent. The structure of written

premiums is led by “non-life” insurance

which comprise 96.9 percent of total

written premiums. In 2016, these

premiums reached a value of EUR 80.9

million, corresponding to an annual

increase of 4.7 percent. The remainder

of 3.1 percent of total written premiums

accounts for premiums of “life”

insurance, which marked an annual

decline of 3.7 percent (figure 112).

Total claims paid by insurance

companies and the Kosovo Insurance Bureau (KIB) in 2016 reached a value of EUR 39.0 million.

Claims paid for “non-life” insurance marked an annual increase of 4.6 percent, while claims paid

for life insurance marked an annual increase of 23.1 percent. The decline of claims paid alongside

with the increase of written premiums, resulted in a decline of total claims paid to written

premiums ratio. In 2016, this ratio decreased to 41.0 percent compared to 46.0 percent as it was

in 2015.

8.2. Performance of the Insurance Sector

Performance indicators of the insurance sector deteriorated in 2016. The sector continued to

mark a loss, which in 2016 deepened significantly compared to previous year. Net income from

the premiums of the insurance sector (which represent around 95 percent of income) marked an

annual increase of 1.2 percent, while at the same time claims incurred marked an annual

increase of 32.5 percent (claims incurred represented around 50 percent of total expenses in two

recent years). Other expenses increased by 11.4 percent, mainly as a result of the increase of net

operating expenses. As a consequence of higher increase of other expenses and claims incurred

against income, the insurance sector registered a loss of EUR 25.6 million (a loss of 8.9 million in

December 2015).

With a loss of 25.9 million was characterized “non-life” insurance, while the performance of “life”

insurance was positive with a net profit of EUR 351.4 thousands. Financial loss of “non-life”

insurance was impacted mainly by actuarial revaluation of technical provisions of some of non-

life insurance companies which over the years had underestimated technical provisions, namely

79.1 82.1 80.0 83.577.1

79.777.3 80.9

2.1 2.4 2.7 2.6

0

10

20

30

40

50

60

70

80

90


Source: CBK (2017)

Total gross written premiums Gross premiums “non-life” Gross premiums (life”

Figure 111. Collected gross premiums, in millions of EUR

33.9

0.4 4.8

December 2016

Claims “non-life” Claims “life” Claims KIB

Figure 112. Claims paid, in millions of EUR

Source: CBK (2017)


78 |

provisions for undefined claims.30 Another significant factor in deepening the loss was also the

high level of expenses as a consequence of the lack of managing them properly.

The sector was characterized also by a decline of key liquidity indicators. The ratio of cash and its

equivalents to reserves declined to 90.7 percent in 2016 (114.8 in 2015). The ratio of cash and its

equivalents to total liabilities declined to 83.4 percent (103.4 in 2015). The decline of the liquidity

level, among others, reflects also the change in the structure of assets of insurance companies,

where it was observed a shift of investments share that was held in the form of cash and its

equivalents towards securities investments.

Capitalization ratio, expressed through the debt ratio to total liabilities and the capital of the

sector, deteriorated reaching 81.2 percent in 2016 from 67.2 percent as it was in the previous

year. The increase of the debt ratio to total liabilities shows a higher reliance of the sector in debt

instruments for financing assets, and at the same time lower level of capital as a more

sustainable form of financing.

30 The transfered loss from underestimation of technical provisions as a consequence of their improper presentation for claims of previous years (2002-2015), totaled

EUR 15.96 million. Moreover, when to this amount it is added also the value of tax payments in circulation (despite the losses realized) of EUR 4 million, and the

payments of the Compensation Fund (caused by uninsured vehicles) with an amount of EUR 4 million, the loss of insurance sector amounted to EUR 25.6 million in 2016.


| 79

9. Microfinance sector and Financial Auxiliaries

Microfinance sector was characterized

with an accelerated increase of its

activity. Assets of the sector reached

EUR 142.2 million in 2016,

corresponding to an annual growth of

23.7 percent (figure 113). In the domestic

market operate 16 microfinance

institutions,31 out of which 12 have

foreign ownership and represent 93.5

percent of total assets of the sector.

Whereas, the share of assets of three

largest institutions to total assets of the

sector declined to 53.2 percent from 51.6

percent as it was in 2015.

9.1. Activity of Microfinance Sector

Structure of assets of microfinance sector

is dominated by loans which comprise

73.7 percent of total assets of the sector

(68.8 percent in 2015). The second most

important category by weight consists of

leasing, which has a share of 15.2

percent (18.2 percent in 2015) (figure

114).

In the previous year, it was observed a

tendency to change assets structure of

microfinance sector, where leasing was

characterized with a decline of share

while loans marked an increase of their

share to total assets. As regards to liabilities, activity of microfinance sector is mainly financed

by borrowings from the external sector. The category of “payable accounts” comprises 74.5

percent of total liabilities of the microfinance sector.

Loans

Total value of loans of microfinance sector in 2016 reached EUR 108.9 million, marking an

accelerated annual increase of 32.2 percent (10.7 percent in 2015). The accelerated increase of

lending may be attributable to the increase of financing sources of microfinance institutions,

mainly the increase of financing from abroad and from own capital impacted by the increase of

retained profit. The number of total loans in 2016 increased to 39,414 from 33,744 as it was in

2015.

Similar to banking sector loans, also MFI loans to households marked a higher increase of 37.5

percent, compared to loans to enterprises which increased by 2.7 percent.

31

Here are included also five financial non-bank institutions which perform credit activities, leasing and factoring.

115.8

112.9 112.9

119.8

148.2

-2.5%

0.0%

6.0%

23.7%

-8%

-4%

0%

4%

8%

12%

16%

20%

24%

100

110

120

130

140

150

160

December2012

December2013

December2014

December2015

December2016

In m

illio

ns o

f E

UR

Source: CBK (2017)

Total assets Annual change (right axis)

Figure 113. Assets of microfinance sector, in millions of EUR

Gross loans, 73.7%

Leasing, 15.2%

Balance with commercial banks, 5.4%

Fixed assets , 2.8% Other assets,

2.3%

Cash, 0.5%

Source: CBK (2017)

Figure 114. Structure of assets of microfinance sector (June 2016)


80 |

Loans to households in 2016 represented

67.0 percent of total loans of the

microfinance sector. Regarding the

maturity, loans to households with a

maturity of “over 2 up to 5 years” have

increased their share thus dominating

the structure of total loans of this

category, unlike in the previous years

when loans with maturity “over 1 up to 2

years” dominated the maturity structure

of loans (figure 115).

The structure of lending to enterprises

by economic activity remains relatively

similar to previous periods. Unlike the

banking sector, where loans to

agriculture represent the category with

the lowest share, in microfinance

institutions agriculture has a share of

28.5 percent to total loans to enterprises.

Other sectors of the economy, which

have higher access to financing from

microfinance are represented by other

services and construction sector (figure

116).

Regarding the lending trend by

economic sectors, until 2016, loans to

agriculture sector registered the highest

annual increase (figure 117).

A significant increase of lending was marked also by industry and construction sectors. While,

lending to trade sector marked significant annual decline. Regarding the structure of lending, it

was observed a shift of lending towards mid-term loans “over 2 up to 5 years” (figure 118).

Leasing

Leasing activity of microfinance institutions marked an increase. The value of leasing of the

microfinance sector reached EUR 22.6 million, corresponding to an annual growth of 3.4 percent

15.3% 14.9%21.4%

14.1%

41.1% 45.9%

47.0%

37.1%

43.1% 39.0%29.9%

48.6%

0.6% 0.2% 1.6% 0.2%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


Source: CBK (2017)

Up to 1 year Over 1 year up to 2 years Over 2 year up to 5 yearsOver 5 year up to 10 years Over 10 years

Figure 115. Loans to households, by maturity

Agriculture, 28.5%

Construction,19.1%Trade,

15.7%

Industry,9.2%

Other services, 28.4%

Source: CBK (2017)

Figure 116. The structure of loans to enterprises, by economic sectors

December 2016

-34%

-24%

-14%

-4%

6%

16%

26%

36%


Source: CBK (2017)

Agriculture Industry Construction Trade

Figure 117. Growth rate of loans to enterprises, by economic sectors

17.6%10.5% 15.6% 10.6%

37.5%44.5%

42.8%

29.6%

43.6% 44.3% 40.3%

59.8%

1.2% 0.7% 1.2% 0.0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


Source: CBK (2017)

Up to 1 year Over 1 year up to 2 years Over 2 year up to 5 yearsOver 5 year up to 10 years Over 10 years

Figure 118. Loans to enterprises, by maturity


| 81

(figure 119). The highest contribution to total growth of leasing was marked by leasing to

households which increased by 8.6 percent compared to 2015.

Leasing to households comprise the

main category, with a share of 55.5

percent in the general structure of

leasing (figure 120). Whereas, leasing to

enterprises comprise 44.5 percent of the

general structure.

Interest Rates

The interest rate of microfinance sector

loans marked a decline in 2016,

declining at the lowest level in three

recent years, namely at 21.3 percent

(figure 121). With an average decline of

interest rates were characterized

household and enterprise sectors.

The average interest rate on loans to

households fell to 22.6 percent in 2016,

from 24.4 percent as it was in the same

period of the previous year. While the

average interest rate on loans to

enterprises decreased to 19.5 percent, in

2016, from 19.9 percent as it was in

2015 (figure 122). Within loans to

enterprises, the sector of services was

characterized with a lower average

interest rate, as a result of the annual

decline of 2.3pp, followed by the average

interest rate of loans to agriculture

which marked an annual decline of 2.0pp. In this period, industry sector was characterized with

an increase of 1.4pp of the average interest rate on loans (figure 122).

22.1 22.4 21.822.6

6.1

12.0 11.512.5

16.0

10.4 10.3 10.1

0

5

10

15

20

25


In m

illio

ns

of

EU

R

Total leasing Household leasing Enterprise leasing

Source: CBK (2017)

Figure 119. Microfinance sector leasing

72.5%

46.5% 47.2% 44.5%

27.5%

53.5% 52.8% 55.5%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


Source: CBK (2017)

Households Enterprises

Figure 120. Structure of leasing, in percent

23.7%23.8%

24.4%

22.6%

19.8%

22.6%

19.9%

19.5%

22.6%23.3%

22.3%

21.3%

17%

18%

19%

20%

21%

22%

23%

24%

25%

26%


Source: CBK (2017)

For households For enterprises Average Interest Rates on Loans

Figure 121. Average interest rate on microfinance sector loans

25.0% 25.5% 25.5%

23.5%

25.3%

23.8%23.6%

25.0%

20.4%

21.7%19.9% 19.9%

19%

21%

23%

25%

27%


Source: CBK (2017)

Agriculture sector Industrial sector Services sector

Figure 122. Average interest rate on loans, by economic sectors


82 |

9.2. Performance of the Microfinance Sector

Microfinance sector was characterized

with an improvement of its financial

performance compared to three recent

years. In 2016, the realized profit

totaled EUR 4.1 million, compared to

the profit of EUR 2.5 million realized in

the previous year. The profit increase

was mainly a result of the higher

increase of income compared to the

increase that was marked by expenses.

In 2016, income of microfinance sector

marked an increase of 16.6 percent,

mainly as a result of the increase of all

income categories, especially the interest

income taking into account the weight of

this category to total income. At the

same period, expenses were

characterized by an annual growth of

10.0 percent, which may be attributable

to the increase of non-interest expenses

of 7.8 percent (figure 123).

Expenses to income ratio of the

microfinance sector has marked an

improvement compared to the previous

year, mainly as a result of higher

increase of microfinance sector income

compared to increase of expenses. NPL

rate decreased at 83.4 percent (88.4

percent in 2015).

The profit realized in 2016 had an

impact in improvement of profitability

indicators, where the Return on Average

Assets (ROA) reached 3.0 percent (2.1

percent in 2015), whereas Return on

Average Equity (ROAE) reached 10.9

percent (7.6 percent in 2015) (figure

124).

The microfinance sector continued to be

characterized by a relatively low level of

nonperforming loans and satisfactory

coverage level of nonperforming loans with loan loss provisions. In 2016, the share of

nonperforming loans to total loans decreased to 2.9 percent (4.2 percent in 2015), mainly being

impacted by the higher increase of loans stock against the increase of nonperforming loans value.

Also, the coverage by provisions improved considerably at 200.2 percent, compared to the level of

124.7 percent in 2015 (figure 125).

0%

20%

40%

60%

80%

100%

120%

0

5

10

15

20

25

30


In p

erc

en

t

In m

illio

ns o

f E

UR

Source: CBK (2017)

Income Expenses Expenses/income (right axis)

Figure 123. Microfinance sector income and expenses

-3.7%

-0.3%

0.6%2.1%

3.0%

-14.0%

-1.1%

2.4%7.6%

10.9%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

-5.0

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

2012 2013 2014 2015 2016

In p

erc

en

t

In m

illio

ns o

f E

UR

Net profit ROAA ROAE

Figure 124. Profitability indicators of microfinance sector

Source: CBK (2017)

0%

50%

100%

150%

200%

250%

0%

2%

4%

6%

8%

Marc

h

Ju

ne

Se

pte

mb

er

Dece

mb

er

Marc

h

Ju

ne

Se

pte

mb

er

Dece

mb

er

Marc

h

Ju

ne

Se

pte

mb

er

De

ce

mb

er

Marc

h

Ju

ne

Se

pte

mb

er

Dece

mb

er

2013 2014 2015 2016

NPLs/total loans NPL coverage with loan loss provisions (right axis)

Source: CBK (2017)

Figure 125. Credit portfolio quality indicators of microfinance sector


| 83

9.3. Financial Auxiliaries

The sector of financial auxiliaries is comprised by exchange bureaus and money transferring

agencies (MTA). This sector comprises the largest number of financial institutions in the country,

albeit manages the lowest share of assets of financial system (0.2 percent in 2016). The value of

assets of financial auxiliaries in 2016 reached EUR 12.6 million, representing an annual increase

of 16.7 percent. Despite the increase of assets, the income of financial auxiliaries marked an

annual decline of 3.9 percent falling to EUR 6.8 million. The structure of income of financial

auxiliaries is dominated by income of transfers (a share of 72.6 percent in 2016), which were

characterized with an annual decline of 3.8 percent. Conversely, expenses marked an annual

increase of 6.3 percent reaching the value of EUR 3.9 million. The income decline and the

increase of sector’s expenses had an impact on the net profit of the financial auxiliaries sector to

decline at EUR 2.9 million in 2016, an annual decline of 14.7 percent.


84 |

10. Macroprudential Policy

In 2016, the Central Bank of the Republic of Kosovo, pursuant to the Law No. 03/L-2009 on the

Central Bank which empowers the CBK to draft the implementation of the policies to preserve

financial stability in the country, has compiled the Policy on Macroprudential Supervisory. The

Policy on Macroprudential Supervisory defines the actions, objectives and instruments as deemed

for Macroprudential Supervisory in order to maintain financial stability. The CBK has also set

up the Advisory Committee on Macroprudence, as a legal body that has been given a mandate on

Macroprudential Policy to assist in its implementation by regularly monitoring systemic risks to

the stability of financial system and to recommend policies and appropriate actions.

The CBK Macroprudential Policy was drafted in compliance with the macroprudential frame of

European Systemic Risk Bord. The main objective of this Policy is to assist in preserving the

stability of financial system thus declining accumulation of systemic risk and strengthening the

resistance of financial system. The intermediary objectives of macroprudential policy are as

follows:

- Reducing and preventing an excessive increase of loans and leverage;

- Reducing and preventing an excessive mismatch of maturity;

- Reducing and preventing non-liquidity;

- Limitation of large credit exposures;

- Limitation of systemic impact of stimulation which aim to reduce moral risk, and

- Strengthening of sustainability of financial infrastructure.

In order to achieve the above mentioned objectives, the CBK, based on the analysis of the risks

on financial system, shall apply a wide range of instruments which will address the systemic risk

linked to the business cycle or to the structure of financial sector. Instruments to be used shall

have a preventing character in decreasing the possibility of happening and expanding a volatile

financial statement, and include many instruments which are currently empowered through the

existing regulations, such as regulatory requirements for capital adequacy with risk weight,

requirements to maintain ensuring needed liquid funds, limitations on credit concentration, etc.

These instruments which initially belong to macroprudential policy, will be as well in the

function of macroprudential policy, where the CBK may apply additional requirements for the

sector in general or for the specific segments depending on the risk analysis. Other possible

instruments of macroprudential character, which are in compliance with laws in power, include

additional regulatory requirements for capital adequacy with risk weight in line with the rate of

systemic risk and the possibility of risk accumulation in different phases of business cycles, and

other limitations to prevent the increase of systemic risk.

In order to increase the transparency regarding the Macroprudential Policy and the appropriate

decisions, the CBK will regularly publish an analysis on systemic risks and the trend of

indicators of macroprudential policy.

10.1. Identification and assessment of systemic risk

The systemic risk presents the risk if considerable interruptions of offering financial services

which are manifested with important negative consequences for financial stability and for the

economy in general. Identification and assessment of the systemic risk should be performed in

compliance with the two dimensional nature of the systemic risk: the one of time and structure.

The dimension of time implies the identification and assessment of the possibility of systemic

risk accumulation over time, while structural aspect implies the risk assessment to the system


| 85

which comes from the interconnections between financial concentration in markets and certain

sectors.

The Central Bank of the Republic of Kosovo steadily monitors general risks to financial stability

through different methods and models, which are supplemented through professional judgment.

The analysis of systemic risk include developments in main economic sectors to which it is

exposed the financial sector, and developments in the financial sector itself and implications for

its stability. Besides the analysis of main indicators of developments in certain sectors, the CBK

has developed and adopted certain models for assessing risks. The recent developed model of

Financial Stability Map, analysis developments through eight risk dimensions to financial

stability such as: external and internal macroeconomic developments, the statement and

developments of main economic agents such as enterprises, households, and government, and the

statement and developments in internal risk indicators of the financial sector such as

capitalization, liquidity and the structure of the banking sector. Stress-test model is one of the

key tools to identify current fragilities of the financial sector and potential systemic risks for the

upcoming year. The CBK has developed a model on Identification of Banks with Systemic

Importance, which continuously has been enhanced, which recently has also been adopted in

compliance with the recent instructions of European Banking Authority (EBA). The model of

banks with systemic importance is a typical instrument of macroprudential policy which assesses

the spread of the risk and negative effects of a systemic important institution in the whole

system. Another typical model of macroprudential policy, which the CBK has started to use is the

identification of the business cycle of the financial sector, in order to assess the systemic cyclic

risk and capital adequacy in line with the risk scale.

The CBK will work with commitment in enhancing the existing models and developments of

other instruments in achieving Macroprudential Policy objectives. Models and instruments shall

be calibrated in compliance with international standards and domestic environment, and will be

considered as a base for Monetary Policy.

10.2. Summary of developments in selected macroprudential indicators

In the second half of 2016, general developments of macroprudential indicators in Kosovo were

sustainable, with no threats to financial stability in the country. All the financial indicators were

within the certain parameters of the legal framework. Nonperforming loans to total loans

continued to follow a declining trend, and were associated with proper coverage. Capitalization

indicators for the whole sector, and banks with systemic importance in particular were quite

above the regulatory requirements. Similar to capital adequacy indicators, the leverage ratio at

the level of 12.1 percent results to stand above the minimal legal requirements for the banking

sector and the banks with the systemic importance. Loans to deposits ratio is considered

adequate standing at the level of around 75 percent. Loan-to-value ratio stood highly above the

level of 100 percent. Liquidity indicators stand at a satisfactory level, especially liquid assets to

short-term liabilities which is above the regulatory requirement. The concentration of large

exposures in the banking system stands at the adequate level with a declining tendency.

Profitability indicators, specifically ROE, stood at high level with 18.4 percent.

Credit to GDP gap gives signals to Kosovo’s banking sector that there is room for further

expansion of lending activity within macro-financial framework environment in which it

operates, despite the annual increase of 10.7 percent in 2016. The banking sector continued to

have four banks with systemic importance. The results of stress-test analysis continuously

suggest satisfactory capability of banks to face extreme situation of the exposure to market or

liquidity risks.


86 |

10.3. Decisions and macroprudential CBK measures

In the second half of 2016, CBK has performed developments assessment in macroprudential

indicators on quarter basis. Based on the movement of systemic risk indicators which suggest for

sustainable developments of the sector in this period, CBK has not evaluated as necessary the

implementation of Macroprudential Policy as the financial stability had already been stable.


| 87

10. Statistical Appendix


88 |


| 89

Table 1. Indikatorët e qëndrueshmërisë financiare, në përqind

Regulatory capital to risk-w eighted assets16.7 17.8 19.0 17.9

Tier 1 capital to risk-w eighted assets12.8 14.6 16.7 15.9

Net nonperforming loans to capital7.8 4.7 3.0 2.2

Assets quality Nonperforming loans to total loans8.7 8.3 6.2 4.9

Other f inancial corporations1.1 0.4 0.4 0.4

Public nonfinancial corporations0.01 0.03 0.03 0.00

Other nonfinancial corporations66.4 65.7 65.6 63.9

Households31.3 33.9 33.9 35.7

NPISH0.05 0.01 0.01 0.02

Nonresidents1.1 0.0 0.0 0.0

Total100.0 100.0 100.0 100.0

Return on assets (ROA)*1.0 2.2 2.5 2.4

Return on equity (ROE)*10.6 22.5 21.6 19.9

Interest margin to gross income 73.1 75.9 75.8 68.1

Non-interest expenses to gross income 84.8 66.6 51.6 49.6

Liquid assets (core) to total assets 27.7 25.9 24.2 26.3

Liquid assets (broad) to total assets 36.6 32.8 29.2 31.7

Liquid assets (core) to short-term liabilities 35.7 32.4 30.9 34.5

Liquid assets (broad) to short-term liabilities47.1 41.0 37.3 41.5

Sensitivity to market risk Net opened position in foreign currency to capital 2.3 1.8 1.8 4.4

Encourage set

Capital to assets9.7 10.8 12.2 12.1

Credit exposure to capital107.4 97.1 63.5 66.9

Personnel expenses to non-interest expenses38.5 41.7 36.8 36.4

Loans to deposits interest rate spread8.7 8.1 6.5 6.0

Client deposits to total (non-interbank) loans131.6 129.3 130.3 125.8

Foreign-currency-denominated liabilities to total liabilities 4.6 0.0 3.7 4.1

*Net income before tax w ere considered

Guide: Financial Soundness Indicators, Compilation Guide, IMF (2006)

December 2016December 2013 December 2014 December 2015

Capital adequacy

Sectoral distribution of loans to total loans

Profitability

Liquidity

Banking Sector Core set


90 |

Table 2. Balance sheets of commercial banks, December 2016, in millions of EUR

(In millions of euro)

Cash and balances w ith CBK 110.0 Balance from other banks 0.5

Balance w ith commercial banks 51.0 Deposits 724.7

Securities 207.7 Other borrow ings -

Loans 513.7 Other liabilities 44.4

Fixed assets 10.4 Subordinated debt 19.3

Other assets 4.5 Ow n resources 108.3

Source: CBK (2017)




Securities 132.7 Other borrow ings 10.0




Source: CBK (2017)






Fixed assets 11.9 Subordinated debt -


Source: CBK (2017)

897.3TOTAL LIABILITIES AND OWN RESOURCES897.3TOTAL ASSETS

Liabilities Assets

823.5

545.0

Assets Liabilities

TOTAL ASSETS 823.5 TOTAL LIABILITIES AND OWN RESOURCES

TOTAL LIABILITIES AND OWN RESOURCESTOTAL ASSETS 545.0

Procredit Bank

Raiffeisen Bank

NLB Prishtina

Assets Liabilities


| 91




Securities 14.5 Other borrow ings -




453.4 453.4

Source: CBK (2017)







Other assets4.2

Ow n resources26.6

Source: CBK (2017)


Cash and balances w ith CBK45.1

Balance from other banks2.3

Balance w ith commercial banks7.9

Deposits197.6

Securities24.8

Other borrow ings-

Loans148.0

Other liabilities10.6

Fixed assets

6.5

Subordinated debt

1.1

Other assets0.8

Ow n resources21.4

Source: CBK (2017)

TOTAL LIABILITIES AND OWN RESOURCES 233.0

TOTAL ASSETS 336.1 TOTAL LIABILITIES AND OWN RESOURCES

Assets Liabilities

Assets Liabilities

TOTAL ASSETS

TEB Bank

Liabilities

336.1

TOTAL ASSETS 233.0

Banka Ekonomike

Banka Kombëtare Tregtare

Assets

TOTAL LIABILITIES AND OWN RESOURCES


92 |





Deposits139.6

Securities18.3

Other borrow ings0.0

Loans

107.8

Other liabilities

7.9


Other assets1.4

Ow n resources14.8

Source: CBK (2017)



Balance from other banks-


Deposits53.3

Securities0.0


Loans2.9


Fixed assets0.0

Subordinated debt0.0


Source: CBK (2017)





Deposits30.7

Securities4.6


Loans54.7


Fixed assets0.9


Other assets0.2

Ow n resources10.2

Source: CBK (2017)

Türkiye İş Bankası

Assets Liabilities

TOTAL ASSETS 74.7 TOTAL LIABILITIES AND OWN RESOURCES 74.7



Komercijalna Banka

Assets Liabilities

Assets Liabilities

Banka për Biznes


| 93




Balance w ith commercial banks-

Deposits3.3

Securities6.6


Loans8.9


Fixed assets1.1


Other assets0.0

Ow n resources8.6

Source: CBK (2017)

Ziraat Bank

Assets Liabilities



94 |

Table 3.1. FC survey – net foreign assets and domestic claims

(In millions of euro: End of period)

Description

Net foreign assets

Domestic claims

Claims on nonresidents of which :

Liabilities to nonresidents

Net claims on central governments

Claims on other sectors

of which :

Monetary gold and

SDR holdings

Deposits

Securitites other than shares

IMF Quota

Shares and other equities

Claims on central government

Liabilities to central government

Loans

of which :

Other nonfinancial corpor-at.

Househ-olds

2007 1,622.4 1,704.6 __ 955.0 408.9 __ 175.4 82.3 124.5 -853.3 __ 853.3 977.8 965.9 765.1 200.6

2008 1,593.1 1,726.7 __ 795.1 661.6 __ 128.2 133.6 419.6 -871.8 __ 871.8 1,291.5 1,276.8 995.7 281.0

2009 1,700.5 2,036.2 60.3 910.1 724.5 64.3 144.3 335.7 571.5 -846.3 __ 846.3 1,417.8 1,396.1 1,052.3 343.5

2010 1,935.4 2,365.6 64.0 1,235.7 525.2 68.5 269.3 430.2 788.9 -802.7 22.1 824.8 1,591.6 1,568.3 1,127.7 434.2

2011 2,047.3 2,425.6 65.1 1,338.9 230.0 70.1 533.1 378.2 998.8 -778.0 20.5 798.4 1,785.8 1,785.8 1,242.1 514.6

2012 December 2,224.1 2,660.4 63.3 1,147.7 486.0 68.8 666.5 436.3 1,195.5 -651.7 186.8 838.5 1,847.2 1,819.4 1,271.3 546.3

2013 March 2,263.4 2,708.3 63.3 1,076.5 515.7 69.0 734.5 444.8 1,225.0 -638.7 187.0 825.7 1,863.8 1,838.7 1,287.5 549.8

June 2,240.6 2,681.0 61.9 896.6 646.2 67.8 777.9 440.4 1,222.8 -686.6 222.9 909.5 1,909.4 1,882.0 1,314.8 566.1

September 2,429.1 2,891.2 60.7 870.4 826.8 66.8 816.9 462.1 1,207.2 -671.8 242.8 914.6 1,879.0 1,853.2 1,291.5 560.6

December 2,452.7 2,908.3 59.6 1,037.9 818.7 65.9 651.2 455.6 1,369.1 -515.0 258.9 774.0 1,884.2 1,859.9 1,291.1 567.7

2014 Mars 2,489.0 2,975.3 59.5 1,000.6 899.8 66.2 660.9 468.2 1,389.6 -517.3 293.5 810.8 1,906.9 1,883.2 1,313.4 568.5

June 2,426.7 2,900.3 59.9 943.2 803.3 66.9 752.4 473.6 1,495.2 -478.6 332.2 810.8 1,973.8 1,949.3 1,351.3 597.0

September 2,599.8 3,058.1 61.6 1,142.9 574.9 69.1 967.4 458.2 1,474.6 -488.3 327.8 816.1 1,962.9 1,939.2 1,325.5 613.4

December 2,546.6 3,011.6 62.5 1,313.0 315.7 70.4 1,024.4 465.0 1,609.0 -386.7 349.2 735.9 1,995.8 1,971.5 1,345.5 625.3

2015 Mars 2,661.0 3,147.3 66.5 1,363.5 329.0 75.3 1,078.7 486.3 1,634.4 -386.0 374.9 760.9 2,020.4 1,991.9 1,361.8 629.3

June 2,551.4 3,047.3 65.4 1,212.9 400.3 74.4 1,055.8 495.9 1,761.4 -365.4 400.2 763.1 2,126.8 2,096.8 1,431.4 664.6

September 2,643.6 3,154.5 64.5 1,303.7 396.4 74.0 1,045.6 510.9 1,717.8 -399.9 449.8 849.7 2,117.7 2,086.6 1,417.7 668.2

December 2,637.1 3,160.3 65.1 1,271.6 378.2 75.1 1,086.3 523.2 1,837.9 -305.3 454.3 759.6 2,143.2 2,114.8 1,416.3 697.7

2016 Mars 2,672.1 3,239.9 56.2 1,106.4 592.4 103.4 1,083.7 567.8 1,863.9 -337.9 470.3 808.2 2,201.8 2,170.7 1,451.1 717.6

June 2,673.0 3,249.0 56.2 952.0 759.6 104.1 1,077.4 575.0 1,945.3 -359.5 467.6 827.1 2,304.8 2,274.9 1,508.1 764.7

September 2,882.6 3,441.4 55.3 826.4 810.2 103.5 1,219.2 542.2 1,885.0 -447.1 461.6 908.7 2,332.1 2.301.4 1,515.5 782. 6.

December 2,837.0 3,379.2 56.0 648.0 842.3 105.3 1,307.4 539.2 2,089.7 -289.8 452.5 742.3 2,379.5 2,353.0 1,550.6 799.1

Source: CBK (2017)


| 95

Table 3.2. FC survey – liabilities


Description

Deposits

Loans

Insurance technical reserves

Shares and other

equity

Other items (net)

Transferable deposits

of which :

Other deposits

of which :

Public nonfinan-

cial corpora-

tions

Other nonfina

ncial corpora

tions

House-holds

Public nonfinancial corpo-rations

Other nonfinancial corporations

Households

Net equity

of househo-

lds in

pension

funds

Prepayment of

premiums&reservs against outst- anding claims

2007 1,110.9 386.1 49.6 133.5 187.5 724.8 188.4 43.8 489.3 … 316.1 286.2 29.9 273.8 46.0

2008 1,351.9 390.9 15.4 176.0 186.2 961.0 250.1 51.4 656.7 … 288.6 256.3 32.3 311.1 61.1

2009 1,444.3 483.2 50.1 184.0 237.7 961.0 73.9 82.9 801.9 … 422.3 380.8 41.5 326.1 79.3

2010 1,744.2 621.2 83.8 218.6 303.5 1,123.1 42.8 83.4 995.9 … 540.5 493.7 46.8 361.0 78.6

2011 1,933.6 658.4 68.1 208.1 360.9 1,275.1 60.8 79.7 1,129.6 … 647.8 593.3 54.5 389.7 75.0

2012 December 2,076.6 700.2 13.8 257.5 407.2 1,376.5 61.8 78.2 1,232.9 … 814.9 745.1 69.8 399.2 128.9

2013 March 2,077.8 692.3 19.1 234.4 415.8 1,385.5 50.9 74.2 1,255.5 … 866.8 800.3 66.2 403.6 140.0

June 2,048.9 698.9 16.0 231.8 425.2 1,350.1 48.8 75.4 1,221.3 … 880.0 808.8 41.2 398.0 137.0

September 2,169.0 761.8 14.4 270.8 450.9 1,407.2 72.9 73.6 1,255.6 … 932.2 859.5 72.7 397.5 137.6

December 2,275.3 848.0 16.4 299.6 506.6 1,427.3 55.7 98.2 1,268.4 … 990.3 919.0 71.3 403.9 152.4

2014 Mars 2,255.3 873.1 39.9 260.9 536.1 1,382.2 42.5 79.2 1,255.6 … 1,026.9 954.3 72.6 415.8 180.7

June 2,243.3 917.9 33.3 256.3 602.7 1,325.3 58.2 67.7 1,194.3 … 1,078.2 1,002.6 75.6 419.5 180.8

September 2,329.2 1,047.3 32.5 300.9 683.8 1,281.9 53.9 75.3 1,150.2 … 1,123.4 1,044.6 78.8 441.4 180.5

December 2,354.4 1,134.6 21.1 338.4 743.5 1,219.8 51.6 58.0 1,104.8 … 1,173.8 1,094.1 79.7 453.2 175.8

2015 Mars 2,380.8 1,184.9 30.9 306.0 818.7 1,196.0 37.8 66.6 1,086.5 … 1,256.3 1,175.0 81.3 479.8 178.5

June 2,393.0 1,217.7 10.9 335.3 841.8 1,175.3 36.7 72.4 1,062.8 … 1,270.0 1,184.3 85.7 484.3 165.5

September 2,466.9 1,342.9 21.8 386.4 897.6 1,124.0 24.1 60.0 1,037.1 ... 1,253.6 1,163.7 89.8 496.0 144.8

December 2,514.6 1,378.4 11.2 413.8 919.0 1,136.3 20.6 68.3 1,046.8 ... 1329.6 1,237.3 92.3 530.5 100.2

2016 Mars 2,486.2 1,366.0 9.9 365.0 957.0 1,120.2 20.8 65.1 1,034.3 ... 1365.0 1,271.9 93.1 549.9 134.8

June 2,526.8 1,419.9 17.7 381.5 988.2 1,106.9 26.7 64.8 1,015.3 ... 1,438.0 1,330.7 107.5 534.0 120.3

September 2,612.4 1,526.5 24.6 416.1 1,049.4 1,085.9 26.7 62.1 996.7 … 1,496.0 1,385.4 110.8 543.2 115.8

December 2,739.8 1,630.1 24.7 456.0 1,116.0 1,109.6 32.2 70.8 1,006.2 … 1,546.0 1,425.4 120.6 542.3 98.6

Source: CBK (2017)


96 |

Table 4.1. ODC balance sheet – assets


Description

Total assets

Cash and

balances with CBK

Balance with commercial banks

Securities

Gross loans Of which in euro

Gross loans in non euro currency

Fixed assets

Other assets

In euro currency

In non-euro

currencies

Other financial

corporations

Public non financial

corporations

Other non financial

corporations

House- holds

2007 1,435.0 189.0 208.1 173.4 34.7 78.9 892.1 __ 0.2 691.3 200.6 __ 27.2 39.7

2008 1,808.2 218.2 283.9 236.3 47.6 40.5 1,183.4 0.6 0.1 901.7 281.0 __ 39.0 43.1

2009 2,204.1 322.7 405.6 326.7 78.8 97.0 1,289.0 2.3 0.3 942.9 343.5 __ 43.1 46.7

2010 2,455.1 307.0 439.1 367.3 71.8 173.4 1,458.7 9.9 6.3 1,004.1 434.2 2.5 44.0 32.9

2011 2,649.7 331.5 329.5 251.8 77.7 202.0 1,698.1 17.3 1.5 1,127.0 510.9 7.3 47.4 41.3

2012 2,829.3 425.7 287.9 228.0 59.9 256.6 1,763.4 19.8 1.4 1,169.8 542.6 6.9 57.7 38.1

2013 3,059.3 463.3 339.9 258.8 81.0 354.5 1,805.8 20.4 0.2 1,194.5 563.9 6.1 55.5 40.3

2014 December 3,185.7 447.1 390.8 328.0 62.8 383.8 1,882.4 7.1 0.6 1,246.4 621.6 6.0 53.7 27.9

2015 April 3,256.8 391.7 423.8 363.7 60.2 422.3 1,936.4 8.8 0.2 1,284.9 635.6 6.1 52.8 29.7

May 3,262.2 397.1 395.5 336.4 59.1 429.4 1,957.4 9.1 0.3 1,294.4 646.7 6.4 52.7 30.1

June 3,269.6 397.4 341.9 286.0 56.0 443.8 2,005.2 9.0 0.6 1,328.0 660.8 6.3 52.7 28.6

July 3,296.1 418.6 348.1 287.6 60.6 443.8 2,001.1 8.8 0.2 1,317.8 667.5 6.4 51.9 32.6

August 3,349.2 415.7 384.9 323.3 61.7 472.4 1,985.1 8.9 0.1 1,298.7 670.4 6.3 53.0 38.0

September 3,321.4 431.4 334.2 271.1 63.1 473.4 1,993.3 8.2 0.6 1,313.4 664.4 6.2 53.5 35.6

October 3,331.7 460.9 354.3 289.9 64.5 423.4 2,006.5 7.8 0.1 1,309.6 682.1 6.3 55.3 31.3

November 3,339.1 434.0 367.5 307.4 60.1 437.2 2,015.3 8.1 0.1 1,326.8 673.5 6.3 55.3 29.8

December 3,385.3 491.0 316.0 254.7 61.3 473.3 2,019.5 8.7 0.6 1,309.5 694.3 5.9 57.0 28.5

2016 January 3,371.2 496.6 334.0 271.1 62.9 445.4 2,005.7 8.5 0.1 1,297.8 692.9 5.9 57.9 31.7

February 3,372.7 461.1 339.4 276.1 63.3 458.7 2,026.4 6.2 1.6 1,313.4 698.7 5.8 57.1 30.0

March 3,397.8 447.4 318.4 247.4 71.0 467.9 2,070.2 8.9 2.1 1,338.8 713.9 5.7 56.9 37.0

April 3,381.7 435.9 312.2 241.7 70.5 445.9 2,102.5 9.4 1.6 1,357.2 727.9 5.8 56.7 28.5

May 3,422.4 434.1 323.4 250.7 72.7 436.2 2,143.2 9.8 1.6 1,379.2 747.6 4.4 56.4 29.1

June 3,432.1 433.2 285.7 214.2 71.5 453.1 2,173.5 10.8 2.1 1,394.5 761.0 4.4 56.5 30.0

July 3,451.4 435.3 307.2 238.0 69.2 429.5 2,184.3 8.9 ... 1,400.8 770.0 4.4 56.4 38.6

August 3,518.9 458.7 364.7 286.5 78.1 435.8 2,168.5 8.0 … 1,382.0 773.9 4.3 56.6 34.6

September 3,512.7 418.9 339.1 259.2 79.9 479.5 2,184.4 8.0 … 1,392.2 779.7 4.3 57.7 33.2

October 3,504.7 426.9 295.0 220.7 74.3 490.6 2,197.4 8.2 … 1,399.0 785.6 4.3 56.7 37.9

November 3,518.4 411.3 338.7 271.7 67.0 463.2 2,212.3 6.2 … 1,409.2 791.4 4.4 57.2 35.7

December 3,637.1 457.3 342.0 281.2 60.7 510.3 2,230.0 7.9 … 1,420.8 796.5 4.2 58.5 39.0

Source: CBK (2017)


| 97

Table 4.2. ODC balance sheet – liabilities


Description

Total liabilities

Balances from other banks

Deposits Other

borrowings

(incl. non

neg. CD)

Provisions

(write-

downs) Other liabilities

Subordinated

debt

Own

resources of which :

Transferable

deposits

Other

deposits

Saving

deposits

Share capital

2007 1,435.0 25.8 1,143.1 380.7 762.4 _ 2.7 … 103.7 7.0 152.7 114.9

2008 1,808.2 34.9 1,444.1 429.8 1,014.2 _ … … 129.8 7.0 192.5 145.9

2009 2,204.1 58.5 1,744.9 517.8 1,229.5 _ … … 171.7 24.4 204.6 159.4

2010 2,455.1 70.7 1,936.8 671.0 923.2 342.7 23.4 0.1 160.0 33.5 230.5 170.4

2011 2,649.7 40.0 2,104.0 699.0 1,056.8 348.2 30.4 0.2 191.3 31.0 252.8 176.6

2012 2,829.3 6.0 2,279.1 751.9 1,172.1 355.0 18.9 1.7 221.4 31.0 270.8 200.1

2013 3,059.3 16.5 2,449.0 900.8 1,143.9 404.2 13.4 2.0 244.1 56.3 277.8 221.2

2014 December 3,185.7 31.6 2,537.5 1,198.3 803.9 535.3 14.1 2.9 229.2 47.3 323.0 231.3

2015 April 3,256.7 34.1 2,575.7 1,268.9 745.7 561.1 14.8 2.6 229.3 47.3 352.8 263.9

May 3,262.2 33.9 2,573.6 1,277.8 736.5 559.3 14.4 2.8 229.2 47.3 360.9 263.9

June 3,269.6 55.6 2,574.6 1,291.1 730.8 552.7 13.1 2.8 226.5 47.3 349.7 263.9

July 3,296.1 38.2 2,615.0 1,361.1 704.2 549.7 13.3 2.6 222.1 47.3 357.5 263.9

August 3,349.2 42.5 2,656.9 1,417.4 689.0 549.8 13.1 4.3 220.3 47.4 364.5 263.9

September

3,321.4 46.8 2,656.5 1,437.4 668.3 550.8 13.3 2.8 208.1 35.8 358.2 263.9

October 3,331.7 58.2 2,635.3 1,416.8 669.7 548.8 15.4 3.0 209.3 35.8 374.6 273.9

November 3,339.1 61.3 2,628.3 1,408.9 667.3 551.9 20.0 2.9 209.2 35.8 381.6 273.9

December 3,385.3 43.4 2,702.9 1,477.7 669.3 555.9 17.6 2.7 189.1 36.9 392.7 273.9

2016 January 3,371.4 46.0 2,670.6 1,450.5 667.2 552.9 17.6 2.9 198.8 36.8 398.7 273.9

February 3,372.7 46.9 2,663.8 1,449.4 666.6 547.8 17.6 2.9 199.4 36.8 405.3 273.9

March 3,397.8 59.3 2,664.0 1,449.0 665.6 549.5 17.7 2.8 205.9 37.8 410.0 273.9

April 3,381.7 70.9 2,651.7 1,447.8 666.1 537.8 17.7 2.8 194.2 37.9 405.3 273.9

May 3,422.4 81.1 2,674.9 1,479.3 661.1 534.5 19.7 3.8 189.8 38.0 415.2 275.9

June 3,432.1 90.2 2,692.8 1,504.7 661.0 527.1 18.7 3.4 185.7 38.1 402.6 275.9

July 3,451.4 72.8 2,719.8 1,534.0 661.7 524.0 18.7 3.4 187.2 37.8 411.6 275.9

August 3,518.9 76.8 2,797.1 1,622.9 659.8 514.4 18.7 6.4 181.5 38.0 400.3 275.9

September 3,512.7 73.2 2,789.5 1,619.5 657.5 512.5 18.7 3.3 183.8 37.4 406.8 275.9

October 3,504.7 72.7 2,774.6 1,615.7 649.0 511.7 18.7 3.4 187.4 38.1 409.9 275.9

November 3,518.4 66.4 2,804.9 1,619.9 657.6 510.4 18.9 3.8 189.3 38.2 415.7 275.9

December 3,637.1 59.1 2,897.8 1,679.8 703.8 515.9 17.8 3.9 199.5 38.4 420.6 275.9

Source: CBK (2017)


98 |

Table 5.1. ODC deposits - euro deposits


Description

Total deposits in euro

Government Finanncial corporations

Non financial corporations Other domestic sectors Nonresi-

dents

Other depository

corporations Other

financial

intermedi-

aries

Insurance

compani-

es

Pension

funds

Financial

auxilliaries

Public

nonfinancial

corporati-

ons

Other

nonfinancial

corporations

Households NPISH

2007 1,092.0 4.1 39.1 3.1 5.6 28.3 0.4 1.7 386.2 215.5 170.7 647.0 631.9 15.2 15.6

2008 1,366.9 1.4 62.9 5.0 6.5 31.5 19.4 0.4 479.7 263.8 215.9 785.0 774.5 10.5 37.9

2009 1,640.1 165.0 78.2 6.1 5.9 43.1 22.6 0.4 371.5 121.6 249.9 962.2 948.8 13.4 63.2

2010 1,831.1 11.7 105.0 7.3 7.9 47.6 41.6 0.6 414.9 122.3 292.6 1,220.1 1,206.1 14.0 79.4

2011 1,982.4 2.7 117.5 9.9 6.8 57.2 43.1 0.5 406.6 128.5 278.1 1,395.6 1,373.4 22.2 60.0

2012 2,162.8 0.7 120.0 3.8 6.2 64.3 45.3 0.4 401.7 75.6 326.1 1,558.6 1,535.4 23.2 81.7

2013 2,314.1 1.8 88.2 2.5 7.4 72.3 5.7 0.3 455.6 72.1 383.5 1,685.1 1,658.7 26.4 83.4

2014 December 2,426.6 8.8 104.4 2.6 5.1 79.3 17.1 0.3 449.7 61.8 388.0 1,781.6 1,751.1 30.6 82.1

2015 April 2,468.2 10.0 94.9 4.6 3.8 70.8 14.0 1.7 432.8 54.5 378.3 1,837.4 1,810.3 27.1 93.2

May 2,465.0 10.2 89.5 3.0 4.3 66.9 13.6 1.7 438.8 51.3 387.5 1,836.6 1,809.2 27.4 90.0

June 2,460.3 10.5 87.7 3.9 3.4 65.3 13.5 1.7 443.0 47.6 395.3 1,834.3 1,807.8 25.6 84.9

July 2,495.7 10.4 84.6 1.8 4.1 64.4 12.6 1.8 449.4 43.8 405.6 1,849.8 1,819.3 29.9 101.5

August 2,540.9 10.9 85.7 5.6 3.6 62.1 12.3 2.1 486.4 43.4 443.1 1,862.3 1,830.1 32.2 95.7

September 2,536.8 11.2 85.3 5.2 3.8 62.2 12.2 1.9 481.0 45.9 435.2 1,865.3 1,830.8 34.5 94.0

October 2,516.6 10.3 83.1 5.1 5.3 59.7 11.4 1.6 472.0 46.5 425.5 1,861.3 1,824.7 36.5 89.9

November 2,511.2 9.3 85.0 4.5 6.8 58.1 14.2 1.5 466.4 36.2 430.2 1,862.3 1,828.3 34.0 88.1

December 2,579.9 5.9 73.2 3.3 5.0 59.0 4.8 1.1 499.9 31.4 468.5 1,895.5 1,862.3 33.2 105.3

2016 January 2,859.7 6.4 72.4 3.4 4.8 58.1 4.6 1.5 467.8 31.3 436.4 1,903.1 1,872.5 30.5 100.1

February 2,541.9 4.6 78.9 4.5 5.3 55.2 13.0 0.8 450.1 35.7 414.4 1,912.2 1,878.8 33.4 96.0

March 2,541.3 4.5 80.0 5.1 6.6 54.3 13.2 0.7 446.7 30.2 416.5 1,918.4 1,885.4 32.9 91.8

April 2,526.8 1.4 77.2 4.4 5.4 54.1 12.3 0.9 447.6 37.2 410.4 1,911.1 1,877.5 33.6 89.4

May 2,550.7 4.9 75.6 5.8 5.2 51.6 12.3 0.7 465.4 36.4 429.0 1,918.3 1,885.1 33.2 86.6

June 2,569.9 5.1 83.7 8.8 5.8 56.1 12.2 0.8 470.2 37.6 432.6 1,923.9 1,892.3 31.6 87.0

July 2,573.9 4.7 80.7 6.9 6.2 55.1 11.6 0.8 476.3 37.8 438.5 1,929.7 1,895.0 34.8 82.5

August 2,655.2 4.7 90.0 12.1 7.2 57.8 12.0 0.9 513.4 39.1 474.3 1,966.0 1,928.7 37.2 81.1

September 2,664.5 4.7 88.3 11.6 7.1 55.9 12.8 1.0 506.9 44.4 462.5 1,967.4 1,932.2 35.3 97.2

October 2,652.0 5.7 85.0 10.2 8.6 55.5 9.7 0.9 500.2 42.5 457.6 1,967.3 1,931.9 35.4 93.9

November 2,672.8 5.2 86.3 11.4 7.9 55.8 10.3 0.9 510.6 42.4 468.2 1,973.1 1,936.3 36.8 97.6

December 2,779.6 5.6 96.6 5.6 6.9 59.0 23.7 1.1 560.4 49.0 511.5 2,053.4 2,021.5 31.9 63.7

Source: CBK (2017)


| 99

Table 5.2. Non euro deposits


Description

Noneuro deposits

Finanncial corporatio

ns of which :

Nonfinanc

ial corporatio

ns

of which :

Other domestic sectors Non residen

ts CBK Other

depository

corporati-ons

Other financi

al intermediaries

Insurance

companies

Public nonfi-nanci

al corporations


Households prej te cilave:

NPISH

Transfe-rable

deposits

Saving acco-unt

Other deposits

2007 53.3 0.5 __ … 0.1 0.4 8.1 1.5 6.6 44.3 44.2 16.2 __ 28.0 0.1 0.4

2008 81.9 0.9 __ … … 0.9 11.6 0.1 11.5 68.4 68.2 22.9 __ 45.2 0.3 1.0

2009 112.1 2.1 __ 1.2 … 0.9 18.3 1.3 17.0 91.1 90.9 29.7 __ 61.1 0.2 0.7

2010 113.8 3.1 __ 2.9 __ __ 13.7 4.3 9.4 93.8 93.3 33.1 25.9 34.3 0.5 3.1

2011 131.5 0.3 __ 0.3 __ __ 9.8 0.1 9.7 117.5 117.0 46.5 31.7 38.9 0.4 3.8

2012 120.9 1.6 __ 1.2 0.2 __ 9.6 __ 9.6 104.9 104.7 45.7 27.0 32.0 0.2 4.8

2013 136.9 0.7 __ __ 0.4 __ 14.3 __ 14.3 116.7 116.2 59.6 29.6 27.0 0.5 5.2

2014 December 113. 0.27 … … 0.2 __ 8.49 __ 8.49 97.8 97.3 63.2 21.5 12.6 0.6 6.49

2015 April 111.8 0.0 __ … … __ 10.0 __ 10.0 92.7 92.1 62.8 20.4 8.9 0.6 9.0

May 111.1 0.1 __ __ … __ 8.5 __ 8.5 95.2 94.4 65.1 20.4 8.9 0.8 7.4

June 117.9 0.1 __ __ … __ 12.3 __ 12.3 97.9 96.8 68.0 20.1 8.6 1.1 7.6

July 120.9 0.1 --- --- … --- 13.0 --- 13.0 99.5 98.4 70.6 20.2 7.6 1.1 8.2

August 121.3 0.1 __ 0.1 … __ 10.9 __ 10.9 101.7 101.2 73.7 20.2 7.3 0.6 8.6

September 124.6 0.1 __ 0.1 … __ 11.2 __ 11.2 104.0 103.5 76.6 20.0 6.9 0.5 9.3

October 123.5 0.1 __ 0.1 … __ 11.7 __ 11.7 102.8 102.3 75.8 20.1 6.4 0.5 8.8

November 121.3 0.2 __ 0.2 … __ 10.0 __ 10.0 101.5 100.0 74.4 19.2 6.4 1.5 9.4

December 124.3 0.2 __ 0.2 … __ 13.5 … 13.5 102.8 102.2 76.6 19.3 6.2 0.6 7.8

2016 January 135.5 0.4 __ 0.3 0.1 __ 13.1 … 13.1 113.0 112.8 83.9 21.2 7.7 0.2 8.6

February 127.1 1.2 __ 0.9 0.2 __ 11.0 0.1 11.0 106.0 105.3 78.5 19.4 7.3 0.7 8.8

March 127.8 0.7 __ 0.3 0.4 __ 13.8 0.2 13.6 106.2 105.4 79.2 19.1 7.1 0.8 7.2

April 129.3 0.5 __ 0.2 0.3 __ 14.8 0.1 14.6 106.5 105.9 80.1 19.7 6.1 0.5 7.5

May 131.4 0.5 __ 0.4 0.4 __ 13.5 0.1 13.4 109.6 108.5 81.8 19.5 7.3 1.1 7.7

June 133.6 0.6 __ 0.4 0.2 __ 13.9 0.1 13.7 111.3 110.8 84.2 19.3 7.2 0.6 7.7

July 135.2 1.3 __ 0.7 0.6 __ 15.2 0.2 15.0 110.8 110.3 84.4 19.7 6.2 0.6 7.9

August 140.5 0.9 __ 0.4 0.3 __ 16.7 0.2 16.5 114.0 113.3 87.8 19.8 5.8 0.7 8.9

September 139.5 0.3 __ 0.1 0.1 __ 16.1 0.2 16.0 114.5 113.9 88.3 19.8 5.8 0.7 8.5

October 134.9 0.6 __ 0.5 0.1 __ 12.7 0.2 12.6 112.8 112.1 87.0 19.3 5.8 0.7 8.7

November 128.8 0.6 __ 0.5 0.1 __ 13.2 0.1 13.0 107.3 106.5 82.4 18.2 5.9 0.8 7.7

December 128.9 0.8 __ __ 0.7 __ 15.9 0.2 15.6 101.9 100.8 78.3 17.4 5.1 1.1 10.4

Source: CBK (2017)


100 |

Table 6.1. Deposits at ODC - nonfinancial corporations, euro deposits


Source: CBK (2017)

Description

Non financial corporations

Public nonfinancial corporations Other nonfinancial corporations

Transfer

able deposits

Saving account

Other deposits

of which :

Transfer-able

deposits

Saving account

Other deposits of which :

Over 1 month and up to 3 months

Over 3 months and up to 6 months

Over 2 years

Up to 3 months

Over 6 months and up to 1 year

Over 1 - 2 years

Over 2 years

2007 386.2 215.5 27.1 … 188.4 126.9 __ … 170.7 128.4 … 42.3 28.4 3.7 2.0 __

2008 479.7 263.8 13.7 … 250.1 69.0 __ … 215.9 170.2 … 45.8 23.4 2.0 7.0 __

2009 371.5 121.6 47.6 … 73.9 11.4 52.3 … 249.9 178.0 … 71.9 42.3 … 5.3 10.9

2010 414.9 122.3 79.5 … 42.8 24.3 3.1 12.6 292.6 212.6 16.9 63.1 24.3 17.1 8.8 9.7

2011 406.6 128.5 67.8 0.0 60.8 29.8 17.2 11.6 278.1 201.1 14.0 62.9 17.5 18.5 7.3 8.0

2012 401.7 75.6 13.8 0.0 61.8 46.9 0.1 12.0 326.1 249.6 9.2 67.3 16.0 27.4 6.5 7.8

2013 455.6 72.1 16.4 0.1 55.7 35.3 5.0 12.0 383.5 286.4 17.0 80.1 9.9 54.7 7.1 5.9

2014 December 449.7 61.8 10.2 . 51.6 5.0 3.0 12.2 388.0 330.2 8.7 49.0 4.0 31.7 7.8 7.8

2015 Aprill 432.8 54.5 17.7 . 36.8 0.2 3.0 12.2 378.3 307.5 8.0 62.8 11.2 34.4 3.8 13.0

May 438.8 51.3 14.5 . 36.8 0.2 3.0 12.2 387.5 315.2 8.0 64.2 12.7 33.1 4.1 13.3

June 443.0 47.6 10.9 . 36.7 0.1 … 12.2 395.3 323.3 7.6 64.5 14.3 31.7 5.4 13.1

July 449.4 43.8 9.7 __ 34.2 … … 12.2 405.6 342.6 6.3 56.7 12.6 25.1 5.3 13.7

August 486.4 43.4 9.2 __ 34.1 … … 12.2 443.1 383.8 6.9 52.3 8.9 26.0 23.6 13.5

September 481.0 45.9 21.8 __ 24.1 … __ 12.2 435.2 375.7 7.9 51.6 9.2 21.6 6.9 13.9

October 472.0 46.5 19.4 __ 27.1 … __ 12.2 425.5 365.8 6.6 53.1 10.0 20.2 6.7 13.4

November 466.4 36.2 12.1 __ 24.1 … … 12.2 430.2 367.9 7.8 54.6 11.5 21.4 6.6 13.3

December 499.9 31.4 10.8 __ 20.6 … … 12.8 468.5 400.7 9.6 58.1 8.8 19.8 13.9 13.3

2016 January 467.8 31.3 10.7 __ 20.6 … … 12.8 436.4 370.9 7.9 57.7 8.3 19.5 14.3 12.9

February 450.1 35.7 9.1 __ 26.6 0.0 … 12.2 414.4 355.7 7.2 51.5 7.4 14.2 14.3 12.9

March 446.7 30.2 9.4 __ 20.8 0.3 … 12.2 416.5 352.4 7.5 56.5 3.6 20.9 15.6 13.7

April 447.6 37.2 10.3 __ 26.9 0.3 … 12.2 410.4 346.3 6.3 57.8 13.1 15.0 13.7 13.5

May 465.4 36.4 15.2 __ 21.2 0.2 … 12.1 429.0 363.8 5.7 59.5 15.4 14.7 14.1 13.9

June 470.2 37.6 10.9 __ 26.7 0.3 … 12.1 432.6 368.5 4.7 59.3 13.5 15.6 12.4 13.9

July 476.3 37.8 11.1 __ 26.7 0.2 … 12.1 438.5 373.6 4.9 60.1 11.2 16.8 13.6 13.9

August 513.4 39.1 12.4 __ 26.7 0.2 … 12.1 474.3 415.1 5.6 53.6 5.0 17.1 13.1 14.0

September 506.9 44.4 17.7 __ 26.7 0.2 … 12.1 462.5 401.0 6.1 55.4 6.7 16.8 12.7 15.8

October 500.2 42.5 18.9 __ 23.7 0.2 … 12.1 457.6 398.4 6.2 53.1 8.5 16.1 13.4 14.1

November 510.6 42.4 18.7 __ 23.7 0.2 … 12.1 468.2 407.0 7.9 53.3 8.2 17.2 13.1 14.4

December 560.3 49.0 16.8 __ 32.2 0.2 … 12.1 511.3 441.6 7.0 62.8 8.5 31.8 6.3 14.3


| 101

Table 6.2. Deposits at ODC - households and NPISH, euro deposits


Source: CBK (2017)

Description

Other domestic sectors

Households NPISH


Saving account

Other deposits

of which :


Saving account

Other deposits

Up to 1 month

Over 3 months and up to 6 months

Over 3months and up to1 year

Over 1 - 2 years

Over 1 year and up to 2 years

2007 647.0 631.9 170.6 … 461.3 156.2 __ 141.6 74.6 50.3 15.2 11.9 … 3.3

2008 785.0 774.5 163.3 … 611.2 189.6 __ 234.6 64.8 61.6 10.5 7.7 … 2.8

2009 962.2 948.8 208.0 … 740.8 242.4 315.9 … 63.2 80.5 13.4 11.1 … 2.3

2010 1,220.1 1,206.1 270.4 274.5 661.2 30.0 76.1 347.8 61.1 108.3 14.0 13.0 0.5 0.5

2011 1,395.6 1,373.4 314.4 276.2 782.8 24.8 67.0 257.3 261.5 147.6 22.2 18.3 0.5 3.3

2012 1,558.6 1,535.4 361.5 283.2 890.8 25.2 58.4 337.8 260.5 177.6 23.2 19.7 0.0 3.4

2013 1,685.1 1,658.7 447.0 342.5 869.2 8.7 24.9 455.0 187.1 177.1 26.4 22.3 0.2 3.8

2014 December 1,781.6 1,751.1 680.3 470.3 600.5 3.4 6.0 259.7 155.2 172.2 30.6 28.5 0.1 2.0

2015 April 1,837.4 1,810.3 757.6 499.4 553.2 4.6 6.5 214.2 135.3 189.7 27.1 25.9 0.1 1.1

May 1,836.6 1,809.2 765.4 497.5 546.3 4.5 5.9 206.3 136.2 190.3 27.4 26.8 0.1 0.5

June 1,834.3 1,807.8 773.8 491.4 542.6 5.2 5.7 158.9 177.0 192.6 26.5 25.9 0.1 0.6

July 1,849.8 1,819.3 797.7 490.4 531.2 5.7 5.3 144.3 179.7 193.3 30.5 29.9 0.1 0.6

August 1,862.3 1,830.1 814.3 492.1 523.8 6.0 6.0 123.5 189.9 196.2 32.2 31.7 0.1 0.5

September 1,865.3 1,830.8 821.0 491.6 518.2 5.9 5.9 115.0 190.2 198.6 34.5 34.0 0.1 0.4

October 1,861.3 1,824.7 817.8 491.8 515.1 5.4 5.3 110.9 189.0 201.7 36.5 36.0 0.1 0.4

November 1,862.3 1,828.3 822.8 493.7 511.9 5.3 4.6 113.5 188.8 201.2 34.0 33.5 0.1 0.4

December 1,895.5 1,862.3 842.4 505.3 514.6 5.5 3.1 104.2 191.2 204.8 33.2 32.7 … 0.4

2016 January 1,903.1 1,872.5 852.7 534.5 514.6 6.0 3.2 97.9 196.7 204.8 30.5 33.0 … 0.4

February 1,912.2 1,878.8 873.4 492.5 512.8 5.6 2.8 92.1 198.2 206.5 33.4 33.0 … 0.4

March 1,918.4 1,885.4 877.8 495.2 512.5 5.4 2.7 95.6 193.5 206.7 32.9 32.4 … 0.4

April 1,911.1 1,877.5 876.8 492.9 507.7 5.5 3.0 100.1 185.9 207.3 33.6 33.1 … 0.4

May 1,918.3 1,885.1 887.8 490.8 506.5 5.4 2.8 138.6 144.6 206.9 33.2 32.8 … 0.4

June 1,923.9 1,892.3 904.0 485.1 503.2 5.4 3.9 138.3 142.5 206.1 31.6 31.2 0.1 0.4

July 1,929.7 1,895.0 915.6 479.5 500.0 4.8 3.3 141.7 136.0 207.8 34.8 34.4 0.1 0.4

August 1,966.0 1,928.7 951.6 473.3 503.8 6.3 2.6 156.4 121.1 211.7 37.2 36.8 0.1 0.4

September 1,967.4 1,932.2 961.1 471.5 499.7 5.8 2.6 163.1 114.2 208.2 35.3 34.8 0.1 0.4

October 1,967.3 1,931.9 963.0 470.7 498.2 5.8 3.2 166.6 110.1 206.0 35.4 35.0 0.1 0.4

November 1,973.1 1,936.3 960.6 469.6 506.1 6.0 4.0 176.4 106.9 206.6 36.8 36.4 0.1 0.4

December 2,053.3 2,021.5 1,037.8 481.9 501.8 6.4 4.0 186.3 104.3 193.9 31.9 31.5 0.1 0.4


102 |

Table 6.3. ODC loans – main institutional sectors

(Cumulative data, end of period, in millions of euro)

Description

Total

Financial corporati-

ons

of which :

Nonfinancial corporations of which :

Other domestic

corporations

of which :

Nonresi-dents

Loans in Non Euro Currency

Other financial interme-diaries

Insurance com-panie

s

Public nonfina

ncial corpo-rations


Households

Up to 1

year

Over 1

year

Up to 1 year

Over 1 year

2007 892.1 __ __ __ 691.5 0.2 691.3 174.0 517.3 200.6 200.6 24.0 176.6 __ __

2008 1,183.4 0.6 __ 0.6 901.8 0.1 901.7 191.0 710.7 281.0 281.0 20.9 260.1 __ __

2009 1,289.0 2.3 1.2 1.1 943.2 0.3 942.9 215.7 727.2 343.5 343.5 27.0 316.6 __ __

2010 1,458.7 5.7 2.6 3.0 1,014.5 6.3 1,008.3 259.4 748.9 434.3 434.2 26.5 407.6 1.6 2.5

2011 1,698.1 17.3 15.6 1.7 1,128.6 1.5 1,127.0 298.8 828.2 512.4 510.9 44.0 466.9 32.5 7.3

2012 1,763.4 19.8 16.3 3.5 1,171.2 1.4 1,169.8 313.4 856.4 543.0 542.6 52.2 490.4 22.5 6.9

2013 1,805.8 20.4 17.3 3.1 1,194.7 0.2 1,194.5 378.0 816.5 564.7 563.9 65.4 498.4 19.9 6.1

2014 December 1,882.3 7.1 5.8 1.3 1,233.4 0.6 1,232.7 367.0 865.7 635.4 635.3 69.6 565.7 0.5 6.0

2015 April 1,936.0 8.8 7.7 1.1 1,285.1 0.2 1,284.9 386.8 898.1 635.9 635.6 40.3 578.6 0.4 6.1

May 1,957.0 9.1 8.0 1.1 1,294.7 0.3 1,294.4 377.0 917.4 646.8 646.7 40.7 548.4 0.4 6.4

June 2004.8 9.0 7.4 1.5 1328.6 0.6 1328.0 366.5 961.5 660.9 660.8 41.2 563.4 0.4 6.3

July 2,000.8 8.8 7.9 0.8 1,317.9 0.2 1,317.8 348.6 969.3 667.5 667.5 42.1 569.6 0.4 6.4

August 1,984.7 8.9 8.0 0.8 1,298.8 0.1 1,298.7 332.0 960.4 670.7 670.7 55.3 573.6 0.4 6.3

September 1,992.9 8.2 7.2 0.9 1,314.0 0.6 1,313.4 329.3 980.0 664.5 664.4 54.7 568.1 0.3 6.2

October 2,006.1 7.8 6.8 1.0 1,309.8 0.1 1,309.6 315.6 994.1 682.2 682.1 55.7 585.6 0.4 6.3

November 2,014.9 8.0 7.1 1.0 1,326.8 0.1 1,326.8 311.1 1,015.7 673.5 673.5 56.0 617.4 0.3 6.3

December 2,019.3 8.7 7.4 1.1 1,322.2 0.6 1,321.6 306.9 1,014.7 682.0 682.0 58.2 623.8 0.3 5.9

2016 January 2,330.7 8.6 7.5 1.1 1.297.9 0.1 1,297.8 296.3 1,001.5 693.0 692.9 58.2 634.7 0.3 5.9

February 2,026.1 6.2 5.2 1.0 1,313.4 1.6 1,313.4 301.0 1,012.4 698.9 698.7 57.0 641.7 0.3 5.8

March 2,069.9 8.9 7.4 1.5 1,340.9 2.1 1,338.8 316.1 1,022.8 714.3 713.9 56.9 657.0 0.3 5.7

April 2,102.1 9.4 8.6 0.7 1,358.9 1.6 1,357.2 330.7 1,026.5 728.1 727.9 54.0 673.2 0.3 5.8

May 2,142.9 9.8 9.2 0.6 1,380.8 1.6 1,379.2 347.0 1,032.2 747.9 747.6 54.4 693.2 0.3 4.4

June 2,173.2 10.8 9.5 1.3 1,396.6 2.1 1,394.5 362.2 1,032.3 761.4 761.0 54.5 706.6 0.3 4.4

July 2,184.3 8.9 8.4 0.4 1,400.8 3.1 1,397.7 359.0 1,038.7 770.0 769.7 54.9 714.9 0.3 4.4

August 2,168.5 8.0 7.6 0.4 1,382.0 2.8 1,379.2 362.9 1,016.3 773.9 773.6 53.3 720.3 0.3 4.3

September 2,184.5 8.0 7.7 0.3 1,392.2 3.1 1,389.1 374.3 1,014.8 779.6 779.4 53.4 726.0 0.3 4.3

October 2,197.4 8.2 7.9 0.3 1,399.0 2.6 1,396.4 381.4 1,015.1 785.6 785.3 54.1 731.1 0.3 4.3

November 2,212.3 6.3 6.0 0.3 1,409.9 2.6 1,407.4 393.0 1,041.3 791.3 791.0 60.1 730.9 0.3 4.4

December 2,230.0 7.9 7.5 0.3 1,420.8 2.9 1,417.9 405.0 1,012.0 796.5 796.2 56.1 740.1 0.4 4.2

Source: CBK (2017)


| 103

Table 6.4. ODC loans - main economic sectors, corporates


Source: CBK (2017)

Description

Total

Agriculture

Industry, energy and construction

Services

Up to 1 year

Over 1 year

Up to 1 year

Over 1 year

Up to 1 year

Over 1 year

2007 691.5 29.0 4.1 24.9 144.5 32.8 111.7 518.0 149.5 368.5

2008 902.4 37.4 4.1 33.3 160.2 28.9 131.2 704.8 126.4 578.4

2009 945.5 38.2 3.8 34.4 236.7 54.8 181.9 670.5 113.2 557.3

2010 1,022.8 38.2 1.7 36.5 269.3 77.1 192.2 715.3 188.5 526.8

2011 1,149.5 40.5 2.7 37.8 284.7 82.3 202.4 824.4 220.5 603.8

2012 1,194.2 43.6 3.0 40.6 290.4 74.1 216.2 860.2 232.3 627.9

2013 1,217.4 45.8 3.3 42.5 291.4 95.8 195.6 880.2 286.2 594.0

2014 December 1,256.4 49.8 4.1 45.7 300.0 19.7 154.4 167.2 906.6 288.8

2015 April 1,296.3 49.8 3.5 46.2 305.6 96.6 190.1 940.9 261.9 628.9

May 1,306.4 50.1 3.3 46.8 304.3 89.0 198.0 952.0 261.0 633.9

June 1,340.1 51.0 3.0 48.0 311.3 89.4 203.2 977.8 255.8 668.2

July 1,329.3 51.9 3.0 48.9 307.2 82.8 206.9 970.3 245.0 664.2

August 1,310.2 53.2 3.3 49.9 307.4 83.6 206.7 949.6 246.6 633.4

September 1,324.6 53.8 3.7 50.1 308.5 80.2 208.3 962.3 245.8 644.4

October 1,319.9 53.9 4.1 49.8 308.1 78.7 210.5 957.9 230.7 652.2

November 1,337.6 60.6 5.0 55.6 308.0 75.4 212.5 969.1 230.1 663.7

December 1,333.4 59.9 4.6 55.3 300.6 76.0 224.6 972.9 285.6 687.2

2016 January 1,308.9 53.8 4.3 49.5 302.9 76.1 226.7 952.3 276.6 675.7

February 1,323.8 53.7 4.2 49.5 304.9 77.0 227.8 965.2 281.6 683.6

March 1,352.3 54.3 3.9 50.4 308.2 80.5 227.7 989.8 295.6 694.3

April 1,370.7 53.4 3.7 49.8 313.7 82.8 230.9 1,003.6 309.2 694.4

May 1,391.8 54.6 3.5 51.0 316.8 85.4 231.4 1,020.5 321.6 698.8

June 1,408.5 56.4 4.0 52.4 318.4 89.0 229.4 1,033.7 334.4 699.4

July 1,410.3 56.4 4.0 52.4 319.6 91.0 228.6 1,034.3 332.3 702.0

August 1,390.3 57.6 5.5 52.1 313.5 87.2 226.2 1,019.2 337.3 681.9

September 1,380.6 58.6 7.3 51.3 314.9 89.4 225.6 1,007.0 324.3 682.7

October 1,387.6 59.4 8.7 50.7 314.1 89.3 224.8 1,014.0 323.3 690.7

November 1,397.8 59.1 9.0 50.1 318.3 86.6 231.6 1,020.4 342.9 677.5

December 1,410.1 59.7 9.1 50.6 324.8 93.7 231.2 1,025.5 322.2 703.4


104 |

Table 7.1. ODC effective interest rate - deposit interest rates

(New contracts, unless otherwise indicated)

Description

Interest Rates on Deposits

Nonfinancial corporations

Households

Transferable

deposits

Other deposits Saving

deposit

s

Transf

erable

deposi

ts

Other deposits Saving deposit

s

Less than 250.000 euro More than 250.000

euro

Up to 1 month

Over 1 month and up

to 3 months

Over 3 months and up

to 6 months

Over 6

months

and up to

1 year

Over 1

year and up 2 year

s

Over

2years

Up to 1

month

Over 1

month

and up to

3 mont

hs

Over 6 months and up to

1 year

Over 2

years

Up to 1

month

Over 1

month

and up to

3 mont

hs

Over 6

months

and up to

1 year

2007 December 4.0 0.5 2.7 2.9 4.4 * 4.3 4.1 * 2.4 0.0 2.6 2.7 * 3.6 4.7 5.3 2.3

2008 December 4.4 0.5 3.1 4.0 5.3 * 3.6 4.9 * 2.9 0.1 3.2 4.6 * 4.5 5.0 3.9 2.7

2009 December 4.0 0.7 3.4 3.4 5.0 * 3.9 4.9 * 2.6 0.3 3.1 3.3 * 4.4 5.0 5.5 2.5

2010 December 3.4 0.6 2.4 3.1 5.0 5.1 * 3.7 * 2.1 0.6 2.6 2.6 3.1 4.5 4.8 5.1 2.2

2011 December 3.6 0.9 2.2 2.9 4.9 5.1 2.6 3.9 5.2 2.2 0.5 2.5 2.5 2.9 4.2 4.6 5.4 2.1

2012 December 3.7 0.8 * 2.8 * * 2.7 4.0 4.8 2.1 0.5 2.3 2.5 2.8 4.2 4.5 4.8 2.1

2013 December 2.4 0.5 0.8 * 0.5 * * * * 1.7 0.5 1.7 1.7 2.0 2.9 3.4 4.0 1.7

2014 December 1.1 0.1 0.2 * * * * * 1.9 0.7 … 0.2 0.5 0.3 0.7 0.9 2.0 0.6

2015 April 0.8 0.1 0.3 1.6 0.5 * * * 1.2 0.1 … 0.2 0.7 0.2 0.5 0.6 1.8 0.3

May 0.9 0.1 0.7 1.5 0.1 * * * 0.9 0.1 … 0.2 0.5 0.3 0.6 1.0 1.8 0.3

June 0.8 0.1 1.0 1.4 * * * * * 0.1 … 0.4 0.7 0.3 0.5 0.9 1.7 0.3

July 0.8 0.1 0.7 * 1.6 2.6 * * 1.7 0.1 … 0.3 0.7 0.6 0.6 0.9 1.7 0.3

August 1.0 0.1 1.4 0.6 * 1.8 * 0.7 * 0.1 … 0.3 0.8 0.3 0.8 1.2 2.3 0.3

September 0.9 0.1 0.8 0.5 0.6 * * * * 0.1 … 0.6 0.6 0.4 0.8 0.7 2.0 0.3

October 0.9 0.1 0.9 * 1.1 * * * 1.1 0.1 … 0.6 0.4 0.5 0.7 0.7 2.1 0.3

November 1.0 0.1 1.0 0.5 0.5 * * * 1.7 0.1 … 0.5 0.6 0.5 0.9 1.1 1.7 0.3

December 1.2 0.1 0.9 0.6 1.5 3.2 * * 1.5 0.1 … 0.2 0.7 0.5 0.9 1.4 2.2 0.3

2016 January 0.9 0.1 0.2 * 0.9 1.4 * * 1.4 0.1 … 0.5 0.7 0.5 0.8 0.9 2.0 0.3

February 1.0 0.1 0.6 0.2 1.4 * * 0.9 1.3 0.1 … 0.5 0.5 0.6 0.8 1.2 2.4 0.2

March 0.9 0.1 0.2 0.2 1.2 2.1 * * 1.4 0.1 … 0.2 0.7 0.4 0.7 1.0 1.9 0.3

April 0.8 0.1 0.8 * 0.9 * * * 1.3 0.1 … 0.3 0.4 0.4 0.5 0.8 1.9 0.3

May 0.8 0.1 0.7 * * * * * 1.5 0.1 * 0.4 0.4 0.4 0.5 0.8 1.8 0.3

June 1.0 0.04 0.2 * 0.9 * * * 1.6 0.1 ... 0.4 0.4 0.2 0.5 0.9 1.8 0.3

July 1.3 0.02 0.1 * 1.2 * * * 1.6 0.1 … 0.5 0.2 0.1 0.6 1.0 2.4 0.3

August 1.3 0.02 1.1 * 1.4 2.2 * * 0.7 0.1 … 0.2 0.8 0.4 0.7 1.1 2.5 0.3

September 1.0 0.02 1.1 * 1.2 2.4 * * 1.0 0.1 … 0.7 0.6 0.4 0.6 1.0 1.8 0.3

October 0.9 0.02 0.4 * 1.0 2.0 * * 1.6 0.2 … 0.6 0.2 0.3 0.7 0.9 1.7 0.3

November 1.0 0.02 0.1 * 1.5 1.7 * * 1.4 0.2 … 0.6 0.3 0.3 0.8 1.1 1.8 0.3

December 1.2 0.02 1.4 * 1.6 1.5 * * 1.6 0.2 … 0.7 0.5 0.3 0.8 1.2 2.0 0.3

Source: CBK (2017)


| 105

Table 7.2. ODC effective interest rate - loan interest rates

(New contracts, unless otherwise indicated)

Description

Interest rate on loans /

1

Nonfinancial corporations (Loans)

Households (loans)

Kreditë investuese Kredi tjera biznesore ( jo-investuese )

Over drafts

Credit lines

Loans with favourable

conditions /4

Over drafts

Loans with favourable

conditions /4

Consumer loans

Mortgage loans / 3

Up to 1 year

Over 1

year up

to 5 year

s

Over 5

years

Up to 1 year

Over 1

year up

to 5 year

s

Over 5

years

Up to

1 year

Over 1

year and

up to 5

years

Over 5 years

Cash over loans

Other loans

Cash over loans

Other loans

2007 December 14.1 * 13.8 13.8 * 14.6 … 15.1 13.7 … * * … * 13.7 12.9 12.4 *

2008 December 13.8 * 13.9 13.9 14.2 13.4 … 15.0 13.5 … * 19.5 … … 13.5 9.8 10.8 8.1

2009 December 14.1 * 14.3 14.3 * … * * … * 17.8 … … 13.3 * 10.7 *

2010 December 14.3 16.1 13.9 * 18.7 14.4 * 12.7 13.3 7.7 * 22.6 6.6 8.6 14.6 * 11.7 10.3

2011 December 13.9 17.1 13.6 * 16.4 13.8 * 11.8 12.1 6.1 9.9 16.4 6.0 8.6 14.0 14.3 12.0 10.8

2012 December 12.9 15.4 12.0 10.2 15.3 13.7 * 10.7 11.9 5.9 * 12.5 6.1 8.0 13.1 * 10.8 9.8

2013 December 11.1 12.3 10.9 9.5 11.6 12.9 * 9.4 11.0 6.0 * 14.4 4.6 7.3 11.7 * 10.4 9.0

2014 December 9.2 10.8 9.8 8.4 9.5 10.2 11.8 9.3 11.8 2.2 * 12.9 3.2 2.3 9.1 8.8 8.0 7.8

2015 April 8.3 9.0 8.2 7.2 8.7 9.4 11.7 8.3 9.3 2.7 * 12.8 2.4 7.9 8.8 * 7.5 7.7

May 7.9 8.5 7.5 6.6 7.3 9.1 12.1 8.6 9.6 3.3 * 13.2 3.3 * 8.5 * 7.2 7.0

June 7.6 * 7.2 7.1 7.6 7.9 11.5 7.6 9.9 2.7 * 13.1 2.9 6.7 8.4 * 7.7 7.0

July 8.1 10.5 7.8 7.2 7.4 8.5 10.4 8.0 9.1 3.1 * 13.1 3.6 7.8 8.8 9.8 7.3 7.5

August 7.9 11.0 8.0 7.1 8.4 8.9 13.3 7.6 10.1 2.7 * 13.5 2.4 8.0 9.0 5.8 7.4 7.1

September 7.9 9.0 7.7 7.1 7.4 9.0 10.4 7.3 9.5 2.9 * 12.3 2.8 7.1 8.8 * 7.2 6.9

October 8.2 7.3 8.3 7.6 7.2 9.0 9.2 7.4 8.4 2.4 * 13.1 3.5 6.8 8.8 * 7.1 6.9

November 8.2 6.3 8.0 8.0 7.3 8.5 10.9 7.2 10.1 2.7 * 13.1 3.0 7.1 8.8 * 7.4 6.9

December 7.7 8.0 7.2 7.0 8.0 7.8 6.9 7.1 8.5 0.0 * 12.7 3.1 7.1 8.7 * 7.3 6.8

2016 January 7.7 8.9 6.8 6.4 7.6 8.5 * 7.4 * * * 13.4 3.4 7.3 9.1 8.6 7.3 6.9

February 8.0 7.4 8.1 6.3 7.4 8.4 10.3 6.8 * 1.4 * 13.0 4.4 7.7 8.9 * 7.2 7.0

March 7.4 8.4 7.5 6.2 6.4 7.9 6.9 7.1 8.6 2.3 * 13.1 3.0 6.0 8.2 * 7.4 7.1

April 7.7 8.3 7.2 6.7 6.9 7.8 6.3 6.9 * 2.9 * 13.3 2.3 * 8.0 * 6.9 6.7

May 7.6 6.3 7.7 6.7 7.0 7.9 8.9 6.7 7.7 6.0 * 12.9 3.0 * 7.9 8.0 6.7 6.4

June 7.2 5.6 7.4 5.6 6.6 6.9 * 6.6 8.1 2.5 * 12.6 2.8 * 8.0 * 6.4 5.5

July 7.0 9.3 6.1 6.5 6.2 7.0 10.8 7.0 9.5 3.7 * 13.0 3.2 * 8.2 * 6.7 6.2

August 7.5 * 6.7 7.0 6.6 6.6 * 6.9 7.7 1.5 * 13.1 2.9 * 8.4 * 6.4 6.5

September 7.5 7.2 8.0 7.1 6.3 7.1 * 6.6 8.5 2.5 * 13.0 4.6 * 8.2 * 6.3 6.5

October 7.3 7.1 7.9 6.0 5.9 6.7 5.7 6.7 * 2.3 * 12.8 3.3 * 8.2 * 6.1 6.2

November 7.3 7.6 7.7 6.1 6.1 7.4 * 6.6 8.5 2.4 * 12.2 3.4 * 8.2 * 6.3 6.2

December 7.2 7.2 6.8 6.0 6.8 7.0 7.2 6.5 8.1 4.6 * 11.6 2.6 * 8.3 6.1 6.5 5.8

Source: CBK (2017)


106 |

Table 8.1. ODC income statement - income and expenditures

(In millions of euro: Cumulative data during the year)

Source: CBK (2017)

Description

Net profit / loss for period

Income

Expenditures

Interest income

Non-interest income

Gains from revaluations

Interest expenditures

Non-interest expenditures

General and administrative expenditures

Losses from revaluations

Provision for taxes

2007 34.0 157.9 117.7 39.5 0.7 123.9 26.0 19.9 69.7 0.4 7.9

2008 26.0 195.0 154.7 39.3 1.0 169.0 43.1 27.7 86.2 1.5 10.5

2009 27.4 203.3 164.1 38.7 0.5 175.9 52.1 33.4 86.4 1.2 2.8

2010 32.8 217.1 175.4 41.4 0.3 184.3 55.2 36.0 88.1 0.7 4.3

2011 35.4 239.6 194.6 45.0 0. 204.1 58.4 43.2 97.1 1.2 4.2

2012 18.6 247.1 199.2 47.2 0.7 228.6 63.1 58.7 102.8 0.6 3.3

2013 25.9 249.0 196.2 49.6 3.2 223.0 63.8 55.5 100.5 . 3.2

2014 Dhjetor 60.0 244.2 193.5 47.8 2.9 184.2 44.0 31.6 101.8 . 6.8

2015 April 27.3 77.0 60.8 15.7 0.6 49.8 8.2 6.8 32.1 . 2.7

May 36.0 99.0 78.1 20.2 0.7 63.1 10.1 8.7 40.6 . 3.6

June 44.9 119.6 94.3 24.6 0.7 74.8 12.1 8.6 49.5 . 4.6

July 52.6 139.9 110.2 29.0 0.7 87.3 14.0 10.0 58.0 . 5.3

August 59.7 159.6 125.6 33.2 0.8 99.9 15.9 9.1 69.1 . 5.8

September 69.3 179.2 140.8 37.6 0.9 109.9 17.6 8.9 76.3 . 7.1

October 75.6 198.8 156.2 41.7 1.0 123.3 19.4 10.1 86.0 . 7.9

November 82.3 217.8 171.0 45.7 1.0 135.5 21.0 10.0 95.9 . 8.6

December 94.7 238.2 186.0 51.1 1.1 143.5 22.6 3.6 107.5 . 9.7

2016 January 5.0 19.2 14.7 3.8 0.6 14.1 1.7 3.1 8.5 … 0.8

February 11.5 37.9 28.8 8.0 1.1 26.5 3.1 4.8 17.1 … 1.4

March 16.8 57.6 43.8 12.7 1.0 40.8 4.7 8.8 25.4 … 1.9

April 24.5 76.7 58.9 15.6 2.3 52.2 6.4 11.9 31.4 … 2.6

May 30.5 94.7 73.8 20.1 0.9 64.2 8.0 13.0 39.9 … 3.3

June 37.7 113.7 89.4 24.4 … 76.0 9.5 14.2 48.1 … 4.2

July 46.7 135.8 106.1 29.7 1.0 89.1 11.1 16.8 56.2 ... 5.0

August 55.1 154.9 119.5 33.7 1.8 99.8 11.6 19.0 63.9 … 5.2

September 61.3 175.2 134.4 38.8 2.0 114.0 13.7 21.2 72.3 … 6.8

October 65.0 193.5 149.1 42.5 1.9 128.5 15.2 28.1 81.0 . 4.2

November 70.9 212.0 163.8 46.3 1.9 141.1 16.6 30.3 89.7 … 4.5

December 75.5 231.1 178.5 50.8 1.9 155.6 18.2 33.1 99.5 … 4.9


| 107

11. References

Kosovo Agency of Statistics

Bank of Slovenia

Banka of Albania

Banking Stability Index: A Cross-Country Study, Kristina Kocisova, Technical University of Kosice, Slovakia

Central Bank of Bosnia and Herzegovina

Central Bank of Montenegro

Croatian National Bank

European Central Bank

International Monetary Fund

National Bank of Serbia

National Bank of the Republic of Macedonia

NLB Group: Annual Reports (2012-2016)

PCH: Annual Reports (2012-2016)

RBI: Annual Reports (2012-2016).

Street Garibaldi, No.33, Prishtina, Republic of Kosovo

Tel: +381 38 222 055; Fax: +381 38 243 763

Web:www.bqk-kos.org

Documents

FINANCIAL STABILITY REPORT · CBK Working Paper no. 4 Efficiency of Banks in South-East Europe: With Special Reference to Kosovo . Financial Stability Report Number 11 | 1 BANKA QENDRORE