Total assets of the financial sector in the Republic of Kosovo reached the amount of 4.2 billion euro in 2013. Kosovo has a financial system that is comprised of:
The banking sector
Kosovo’s financial sector is mainly dominated by banks. Since 2000, the banking sector has expanded rapidly. There are presently nine banks, representing 72.3 percent of total financial sector assets in 2013. Seven of them are foreign-owned banks and two are domestically owned. Assets of the foreign-owned banks constituted 89.9 percent of the total assets of the banking sector, while the rest was managed by the domestic owned banks. Products and services of the majority of banks in operating in Kosovo include banking accounts, loans, domestic and international payments, banking cards, banking guarantees, letters of credit and e-banking.
Banks in Kosovo are established as joint stock companies with all shares registered in the name of their beneficial owners, the shareholders. No person is allowed to engage in the business of banking or conducting any financial activity without an effective license issued by the Central Bank of Kosovo. This is likewise for any foreign bank, unless the foreign bank in question has obtained a license issued by the CBK to conduct such activity through a branch office in Kosovo, or has established a subsidiary bank in Kosovo for which a license has been issued by the CBK.
The banking system in Kosovo is regulated by the Law on Banks, Microfinance Institutions and Non-Bank Financial Institutions (Law No. 04/L-093), and the Law on the Central Bank of Kosovo (Law No. 03/L-074).
Pension funds, micro-financial institutions and insurance companies
After banks, pension funds are the largest financial intermediaries. Their role is to complement the pay-as-you-go government funded system and their investments represented 21.7 percent of total financial assets in 2013. Pension system assets reached a value of 918.7 million euro in 2013. The Kosovo Pension Savings Funds (KPSF) manages 99.4 percent of the pension system total assets, while the rest is managed by the Slovenian-Kosovo Pension Fund (SKPF).
There are also 17 small micro-financial institutions (MFI’s) managed by nonprofit organisations, which are not deposit-takers. The sector is mainly dominated by foreign-owned enterprises. In December 2013, the value of micro-financial institutions assets reached to 112.9 million euro. Loans continue to dominate the assets structure, with a share of 64.1 percent. Average interest rates on MFI loans (23.2 percent in 2013) continue to be higher compared to banking sector loans. The micro-financial institutions sector is regulated by the Law on Banks, Microfinance Institutions and Non-Bank Financial Institutions (Law No. 04/L-093), and the Law on the Central Bank of Kosovo (Law No. 03/L-074).
Kosovo is one of the smallest insurance markets in Europe. The insurance sector is represented by one life and 10 non-life insurance companies that together comprise about 3 percent of total assets of the financial sector. The insurance sector is dominated by foreign-owned companies.
The CBK is the single supervisor for all financial intermediaries, including the non-banking sector. In spite of the fact that microfinance institutions are not deposit-takers, they are also supervised by the CBK.