Thumbnail

 

Kosovo adopted the Euro as its official currency on 1 January 2002. With the use of this stable currency as an official mean of payment, the prerequisites for the development of an efficient financial sector and stable macroeconomic environment were in place. Benefits arising from the introduction of the Euro in Kosovo have been obvious and resulted in low inflation rates and strict financial discipline. In particular, the Euro has given Kosovo a considerable advantage over its competitors in the region by making it more attractive to foreign investment, due to low transaction costs as well as the elimination of exchange rate and currency risk.

The absence of traditional monetary policy instruments also enabled the establishment of a very strict and efficient regulatory framework, upon which a sound banking system has been developed.
Achievements in the banking sector in Kosovo have been significant in the last five years. They have resulted in the improvement of public confidence in the banking sector and the strengthening of the intermediation function of banks in the Kosovo economy.

Kosovo introduced a two-tier banking system back in 1999. The Central Bank of the Republic of Kosovo also embodies the characteristics of an integrated financial supervisory agency. Its responsibilities cover licensing, regulation and the supervision of financial intermediaries, and it ensures the proper functioning of the payment system.

The financial sector in Kosovo is bank-based and all of Kosovo's banks are private. There are eight registered banks, of which six are in foreign ownership. The Pro Credit Bank established at the initiative of several leading International Financial Institutions, and the Raiffeisen Bank of Austria, hold the largest market share in the sector.

With banking sector assets accounting for 55 percent of GDP at the end of 2009, Kosovo ranks well with the countries of the region. Loans granted by the banking sector of Kosovo for the same period accounted for 33.7 percent of GDP.

In addition, the lowering of interest rates and the shift from short-term to long-term financing in the banking sector of Kosovo has had a very positive impact on overall economic growth enabling intensive long term capital investments.



[^ Top]