financial stability report - Banka Qendrore e RepublikÃ«s sÃ« KosovÃ«s

More documents

Recommendations

Info

Number 3 Financial Stability Report what currently is characterizing the Kosovo’s banking system. Low exposure to liquidity risk is also confirmed through the countinuous sustainability of the higher level of liquidity reserves compared to the minimal level required by the CBK (Figure 47). In June 2012, the total value of the banking system liquidity reserves was euro 310.3 million, thus exceeding the mandatory reserve by around Figure 48. Liquidity gap, in millions of euro 70 percent (requried reserve for the system was euro 182.8 million). 600 However, besides the effect on reducing the exposure to liquidity risk, holding ‘excessive’ liquidity reserves implies also costs for the banking system considering that banks receive interest CBK only for the amount of the required reserve, while any amount that exceeds the mandatory reserve is not renumerated. 400 200 0 -200 -400 -600 1-7 days 8 - 30 days 31 - 90 days 91 - 180 days Source: CBK (2012) Jun-11 Jun-12 181 - 365 days Over 1 year Another tool to assess liquidity risk is the liquidity gap analysis, through which is assessed the adequacy of assets with a certain maturity period in covering the liabilities within the same maturity period. However, the primary role of the banking business remains intermediation between depositors and borrowers, thus the banking system in general converts the short-term liabilities (deposits) into long-term assets (loans). The analysis is based on the idea that the value of assets maturing within a certain period should be similar with the value of liabilities maturing within the same period. The difference between these two amounts represents the maturity gap or the maturity mismatch. The results presented in Figure 48 are read as follows: the positive gap means that the value of assets is greater than the value of the liabilities within a certain maturity period, while the negative gap means the opposite i.e. the value of assets is less than the value of liabilities within a certain maturity period. 7 Given the fact that in the Kosovo’s banking system loans account for the largest share of assets and deposits account for the largest share of liabilities, the maturity mismatch between assets and liabilities primarily reflects differences between the maturity of loans and deposits. Maturity mismatch remains similar to the previous years. In June 2012, maturity mismatch was more pronounced in the category ‘over 1 year’, where the amount of assets exceeds the amount of liabilities for euro 446.3 million (Figure 48). Compared to June 2011, there has been an improvement in the maturity gap for the category ‘185-365 days’ which continues to be positive but lower than last year (euro 53.5 million compared to euro 70.4 million in June 2011). However, for the first three categories that include assets and liabilities with maturity up to 90 days, not surprisingly, the maturity gap has continued to be negative due to the fact that loans usually have longer maturities than three months. 7 Maturities of assets and liabilities are divided into the following periods: 1 to 7 days 8 to 30 days 91 to 180 days, 181 to 365 days and more than 1 year. 50 |
Financial Stability Report Number 3 6.4.2 Credit Risk The slowdown of the economic growth during 2012 (around 3.8 percent), was reflected in the growth trend of banking system loans, which was significantly slower compared with the previous years. These developments were reflected in the quality of loan portfolio. Figure 49. Structure of loans by clasification 100% 98% 96% 94% 92% 90% 88% 86% 84% 82% 2.4% 2.8% 3.5% 4.3% 1.5% 1.7% 1.7% 2.6% 2.4% 2.2% 3.4% 2.3% 3.1% 2.5% 3.0% 2.0% The ratio of non-performing loans (NPL) to total loans in June 2012 Standard Watch Substandard Doubtful Loss reached 6.5 percent, from 5.9 Source: CBK (2012) percent in June 2011. This increase in NPL represents deterioration in quality of loans portfolio, implying an increased credit risk in the banking system in the country. However, the increase in the ratio of NPL to total loans is not only a consequence of the weakening solvency of borrowers. This increase is also related to the slowdown of lending activity in general. Figure 50 shows that the growth rate of non-performing loans value slowed down significantly, which means that the ratio of non-performing loans to total loans is primarily due to the significant slowdown of total loans growth and not as a result of a significant increase of the value of nonperforming loans. Despite the increase of the ratio of non-performing loans, Kosovo’s banking system continues to have a high level of sustainability, based on the high level of capitalization. This is shown by the stress-test analysis, whose results suggest that high level of capitalization enables banks to cope with even higher levels of NPL with no need of recapitalization. This shows that Kosovo’s banking system is in good shape in terms of credit risk, meaning that the banking system is able to continuously support the economy through credit activity. In this context, it is important that the Figure 50. NPL to total loans ratio, in percent credit activity of banks in Kosovo 7% develops based on the conditions in 5.9% 6.2% 6.5% 5.9% 6.0% 6.0% 5.7% Kosovo’s economy, thus avoiding 6% the perceptions based on 5% 3.9% developments in the external 4.2% 4.4% 4.6% 4.5% 4.6% 4% sector which might not be fully in 3% compliance with the real 2% developments in the economy of 1% Kosovo. 0% Figure 49 shows that in the period Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun June 2011-June 2012 a slight deterioration of the quality of credit portfolio was observed, with 2009 Source: CBK (2012) 2010 2011 2012 a slight migration of loans from categories of better quality towards the categores of weaker quality. As a result, the share of problem loans (categories: substandard, doubtful, and loss) to total loans reached at 9.4 percent (8.2 percent in June 2011). Non-performing loans, 91.0% 89.8% 89.3% 88.5% June 2009 June 2010 June 2011 June 2012 | 51
Page 1 and 2: BANKA QENDRORE E REPUBLIKES SË KOS
Page 3 and 4: Financial Stability Report Number 3
Page 51: Financial Stability Report Number 3
Page 103 and 104:
Financial Stability Report Number 3
Page 105 and 106:
Page 107 and 108:
Page 109 and 110:
Page 111 and 112:
Page 113 and 114:
Page 115 and 116:
show all

financial stability report - Banka Qendrore e RepublikÃ«s sÃ« KosovÃ«s

Create successful ePaper yourself

Delete template?

Save as template?