BANKA QENDRORE E REPUBLIKËS SË KOSOVËS CENTRALNA BANKA REPUBLIKE KOSOVA CENTRAL BANK OF THE REPUBLIC OF KOSOVO RaportiAnnual VjetorReport 20092018 PRISHTIN A , J U N E 2 0 1 9 CBK Working Paper no. 4 Efficiency of Banks in South-East Europe: With Special Reference to Kosovo 2 | CBK Annual Report 2018 BANKA QENDRORE E REPUBLIKËS SË KOSOVËS CENTRALNA BANKA REPUBLIKE KOSOVA CENTRAL BANK OF THE REPUBLIC OF KOSOVO Annual Report 2018 | 1 Annual Report 2018 CBK 2 | CBK Annual Report 2018 CONTENT Foreword by the Chairman of the Board ....................................................................... 11 Foreword by the Governor ............................................................................................ 13 Central Bank Board and Executive Board ..................................................................... 15 Organizational Structure of the CBK, as of 31 December 2018 .................................... 19 1. Executive summary ................................................................................................... 20 2. External economic environment ................................................................................ 25 2.1. Euro area and Western Balkans ...................................................................................................... 25 3. Kosovo’s economy .................................................................................................... 28 3.1. Real sector ....................................................................................................................................... 28 3.2. Fiscal sector ..................................................................................................................................... 32 3.3. External sector ................................................................................................................................. 33 3.4. Financial sector ................................................................................................................................ 35 3.5. Macroeconomic projections for 2019 ............................................................................................... 48 4. Licensing and regulation of financial system ............................................................. 50 4.1. Licensing .......................................................................................................................................... 50 4.2. Regulation ........................................................................................................................................ 55 4.3. Regulatory framework on microfinance institutions and non-bank financial institutions .................. 58 4.4. Regulatory framework on insurers and insurance intermediaries ................................................... 59 4.5. Regulatory framework on pension funds ......................................................................................... 60 5. Supervision of financial system ................................................................................. 61 6. Services provided to the authorities, financial community and to the public .............. 65 6.1. Operations and cash management .................................................................................................. 65 6.2. Accounts maintenance and transactions ......................................................................................... 68 6.3. Payment system ............................................................................................................................... 71 6.4. Assets management ........................................................................................................................ 78 6.5. Information technology ..................................................................................................................... 83 6.6. Credit registry of Kosovo .................................................................................................................. 83 6.7. Activity in the field of economic analysis and financial stability ....................................................... 85 6.8. Main activities in the field of statistics during 2018 .......................................................................... 86 6.9. Review of the requests of financial institutions supervised by the CBK .......................................... 87 7. Internal developments ............................................................................................... 89 7.1. Internal audit .................................................................................................................................... 89 7.2. Human resources ............................................................................................................................. 90 7.3. CBK legal activity ............................................................................................................................. 91 7.4. Risk management function............................................................................................................... 91 | 3 Annual Report 2018 CBK 8. External relations and international cooperation ....................................................... 93 8.1. International cooperation ................................................................................................................. 93 8.2. Communication and financial education .......................................................................................... 94 8.3. Technical assistance ........................................................................................................................ 95 8.4. European integration ........................................................................................................................ 96 9. CBK financial statements .......................................................................................... 99 10. Statistical appendix ............................................................................................... 147 11. References ............................................................................................................ 169 4 | CBK Annual Report 2018 LIST OF ABBREVIATIONS ACH Automated Clearing House ARS Accountancy Registry System ATM Automated Teller Machine BEC Broad Economic Categories BEEP Business Environment Enhancement Project BIC Business Identifier Code BIS Bank for International Settlements BKT Banka Kombëtare Tregtare BPB Banka për Biznes CAR Capital Adequacy Ratio CBK Central Bank of the Republic of Kosovo CEFTA Central European Free Trade Agreement CPI Consumer Price Index CRK Credit Registry of Kosovo DJI Dow Jones Industrial Average DLE Department of Labor and Employment EBRD European Bank for Reconstruction and Development ECB European Central Bank EFSE European Fund for Southeastern Europe ESCB European System of Central Banks EU European Union EULEX European Union Rule of Law Mission in Kosovo EUROSTAT General Directorate of European Statistics FDI Foreign Direct Investments GBP Pound sterling GDP Gross Domestic Product HHI Herfindahl-Hirschman Index IAIS International Association for Insurance Supervisors ICAAP The Internal Capital Adequacy Assessment Process IECS Interbank Electronic Clearing System IIP International Investment Position IMF International Monetary Fund IOPS International Organization of Pension Supervisors IPI Imports Price Index KAS Kosovo Agency of Statistics KEDS Kosovo Energy Distribution Services J.S.C KEK Kosovo Energy Corporation J.S.C KIB Kosovo Insurance Bureau KMB Komercijalna Banka KPST Kosovo Pension Savings Trust | 5 Annual Report 2018 CBK MF Ministry of Finance MFI Microfinance Institutions MLSW Ministry of Labor and Social Welfare MTA Money Transfer Agencies MTPL Motor Third Party Liability Insurance NFA Net Foreign Assets NLB Nova Ljubljanska Banka NPC National Payment Council NPISH Non-profit Institutions Serving Households NPL Nonperforming Loans ODC Other Depositing Corporations PAK Privatization Agency of Kosovo PCB ProCredit Bank POS Point of Sale pp Percentage Point PPI Producer Price Index PTK Post and Telecommunication of Kosovo RBK Raiffeisen Bank of Kosovo J.S.C. REER Real Effective Exchange Rate ROAA Return on Average Assets ROAE Return on Average Equity RTGS Real Time Gross Settlement RWA Risk Weighted Assets SDR Special Drawing Rights SEE Southeastern Europe SEPA Single Euro Payment Area SFR Swiss Franc SKPF Slovenian-Kosovo Pension Fund SWIFT Society for Worldwide International Financial Telecommunication TAK Tax Administration of Kosovo TEB Türk Ekonomi Bankasi TPL Third Party Liability UNMIK United Nations Mission in Kosovo USAID United States Agency for International Development VAT Value Added Tax VPN Virtual Encryption and Network Technology WB World Bank 6 | CBK Annual Report 2018 LIST OF FIGURES 1. Inflation rate in euro area ---------------------------------------------------------------------------------------------- 25 2. Annual real GDP growth rate in Western Balkans---------------------------------------------------------------- 26 3. Annual increase of inflation in Western Balkans ------------------------------------------------------------------ 26 4. Real GDP growth --------------------------------------------------------------------------------------------------------- 28 5. Inflation rate ----------------------------------------------------------------------------------------------------------------