financial stability report - Banka Qendrore e Republikës së Kosovës

Number 3
Financial Stability Report
satisfactory level of stability. Under the hypothetical assumption of a five day deposit
withdrawals, at the above assumed level, the first liquidity problems start to show after the
second day, that is, in only one of the banks (Table 9).
The deposit withdrawal rate from each bank deposits is considered to be 10 percent of the
total deposits on a daily basis for five consecutive days. After the second day, the amount of
the additional liquid assets in the affected bank would be euro 5.06 million (0.11 percent of
GDP), meanwhile the loan to deposit ratio would reach 103.4 percent (assuming that the
level of loans will not continue to grow during this period).
Table 9. Summary of stress test results: Liquidity Risk
Description Number of banks 1/
Additional liquid needed assets (in
thousands of euro)
Loan-to-deposit ratio, in percent
After the first day
After the second day
After the third day
After the fourth day
After the fifth day
0 0 93.1
1 5,056 103.4
2 26,532 114.9
3 63,044 127.7
4 113,115 141.9
1/ The number of banks which would need additional liquid assets.
After the fourth day, the problems with liquidity would be appearing in two other banks,
bringing the number of affected banks into three. In this case, the additional value of liquid
assets necessary to overcome the liquidity problems will reach a value of euro 63.04 million
(Table 9). After the five-day cycle of deposit withdrawals, four of the banks in the system
would have liquidity problems, while the value of the additional liquid assets neededreach
to euro 113.1 million (2.6% of GDP). At this stage, assuming that the loan value will not
change, the banking system loan to deposit ratio would reach 141.9 percent.
Under the assumption of deposit withdrawals with a progressive rate (5 to 10 percent),
even after five days, the liquidity problems appear only in two banks of the system. The
amount of additional liquid assets needed in these two banks would be euro 33.6 million,
while credit to deposit ratio for the entire system would reach 121.9 percent.
The results also indicate a satisfactory level of liquidity in the banking system against the
scenario of deposit withdrawals by the largest depositors in each bank at the same time.
The results suggest that banks appear able to cope with the immediate deposit withdrawals
from the largest depositors, indicating that the current level of financing sources
concentration would not pose a serious liquidity problem.
The results also suggest that banks are able to withstand quite high rates of deposit
withdrawals in general, without facing liquidity difficulties. The banking system is able to
withstand the withdrawal of deposits up to nearly 30 percent of total deposits, without
having problems in maintaining the liquidity position. Under such case, the loan to deposit
ratio would reach 117 percent, assuming that the value of the loans remains unchanged.
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