The banks' conservative approach has contributed to the system's stability and growth.
By Muhamet Brajshori for Southeast European Times in Pristina -- 08/03/13
Banks in Kosovo are stable despite the slowdown in growth. [Laura Hasani/SETimes]
Kosovo's banks have taken measures to ensure the banking sector remains stable despite a continual decrease in the assets in the financial sector, according to experts.
By mid-2012, the banking sector's total assets amounted to 4.8 billion euros, down 13.2 percent from the same period in 2011.
"The movements in profit rates are normal fluctuations and do not provide any basis for concern," Lumir Abdixhiku, executive director of the Pristina-based Riinvest Institute, told SETimes.
Abdixhiku said the banks' conservative approach, which maintains sufficient reserves for lending, has contributed to the banking system's stability.
"Although the rate of bad loans has grown, it is many times lower than in the neighbouring countries," Adbixhiku said.
Officials said banks have also taken measures to minimise risk and strengthen risk management as well as internal control mechanisms.
"In the last year we have taken steps to ... improve business efficiency, rationalise operating costs as well as [increase] the supply of customers and improve the service quality," Shkelzen Kelmendi, head of organisation services at NLB Bank Pristina, told SETimes.
"Our bank earned a net profit of 4.5 million euros and also reached high enough indicators of stability, such as high-level of adequate capital, satisfactory loan portfolio quality as well as high-level of liquidity and return on capital," Kelmendi added.
Kelmendi said Kosovo's inefficient and ineffective legal and judicial systems are two of the main culprits inhibiting growth in the banking sector, but said recent reforms are a step in the right direction.
Kosovo introduced a new penal code, restructured the judicial and prosecutorial system and is appointing more judges and prosecutors while also retraining them.
The reforms are expected to provide the basis to create policies to make the execution of collaterals easier as well as resolve problems in the cadaster system, according to Fatlum Gogiqi, executive director of the Yellow Training Centre in Pristina.
"Improvement of a reformed and efficient judicial system for quickly selecting judicial cases, can directly affect reduction of the interest rate[s] in the country," Gogiqi told SETimes.