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

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Number 3 Financial Stability Report 9.8. The results The three largest banks resulted to be systemically important in all the indicators whereas also some of the smaller banks turned out to be systemically important in certain indicators. More precisely, size criterion turned out as one of the most significant criteria, where the three largest banks also came out persistently as systemically important (Table 3). Within the size criterion, the sub-indicators (aggregated from all banks) that came out as systemically important are: deposits, share in own resources, bank placements, the share of the number of depositors and the retained profit. Regarding the substitutability criterion, five banks turned out as systemically important, from which three of them large banks, and the other two represent relatively smaller banks. This means that concerning some indicators, smaller banks are also important and dominate in providing certain services in the market. Indicators that turned out as systemically important within the substitutability criterion are: share of agricultural loans, share of consumption loans, share of industry and trade loans, and the share of payments through the payment system. Despite the fact that the inter-linkages of the banks operating in Kosovo are fairly low, three largest banks resulted with systemic importance regarding the interconnectedness criterion. This means that the three largest banks are more interconnected with other banks in the country; two smaller banks are less inter-connected, whereas other banks that resulted not to be systemically important are inter-connected with other banks at very low levels or have no inter-connections. Nevertheless, given the relatively low level of bank inter-connections, it should be noted that the potential systemic importance rising from this factor should be relatively low for the whole system. Indicators with systemic importance within the interconnectedness criterion are bank placements on other banks and securities. The interconnectedness of the banks operating in Kosovo is more emphasised with the banks abroad, especially with the parent banks. Table 2. Identification of SIFIs in the banking system of Kosovo *Banks/Criteria Size Substitutability Interconnectedness Bank A Bank B Bank C √ √ Bank D Bank E √ √ √ Bank F Bank G √ √ √ Bank H √ √ √ Note: the ordering of the banks is random. 9.9. Conclusions Even though the importance of systemic risk has gained attention as a consequence of the several financial crises (e.g. Asian financial crisis during ‘90s), the concept of systemically important financial institutions (SIFIs) emerged only after the recent financial crisis that commenced in 2007/2008. In the core of the debate concerning SIFIs underlies the fact that supervisory institutions should pay attention and try to identify the financial institutions not only individually, but rather in a system-wide perspective, where the impact of the SIFIs is also related to the overall economy. This is because the malfunction of these 88 |
Financial Stability Report Number 3 institutions (SIFIs) may propagate serious financial and macroeconomic stability threat, leading to a crisis and imposing enormous costs on the economy, as was recently noticed in the global financial crisis. In this study we have elaborated the concepts of systemic importance in general and identified the systemically important banks (SIB) in Kosovo. In order to identify the SIBs in the banking system of Kosovo, we have relied on three criteria, namely, size, substitutability and interconnectedness. With regard to the size criterion, the results unsurprisingly reveal that the three largest banks in Kosovo are clearly systemically important. Concerning the substitutability criterion, besides the three largest banks, two other relatively smaller banks also came out as systemically important. Besides the relatively low level of inter-connections between banks in Kosovo, three largest banks resulted with systemic importance. | 89
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financial stability report - Banka Qendrore e RepublikÃ«s sÃ« KosovÃ«s

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