Annual Report 2010 03 August 2011 - Banka Qendrore e ...

Annual Report 2010
CBK
Greece and Portugal. Returns from investments serve as a good benchmark and at the
same time as a good point to compare the financial instruments of EU countries with
Germany, which sustained a considerable expansion that was more significant during the
last quarter of 2010. While return from investment in short-term securities of Germany
reached the point of 0.40 percent, those of Portugal culminated at 4 percent. In November
2010, return from investment 10-year credit default swaps of Ireland increased to 9
percent. This is because the main countries of Europe, Germany and France agreed that
private investors should pay for risks taken during investments in Ireland to avoid the
entire barded fall on EU taxpayers. In July 2010, all state and corporate credit default
swaps in Ireland were sold due to a risk of infection of the other European countries.
EONIA (Euro Overnight Index Average) started relatively low in the first part of 2010, but
it had a growing trend during the third and fourth quarters, making overnight investments
of CBK portfolio generate satisfactory profits. In October 2010, the decline of EONIA driven
by turbulences in European debt market was compensated by a considerable growth in the
end of the year. One-week and one-month interest rates given by corresponding banks have
also recorded a growing trend, making short-term investments the most favorable category
of asset invested in CBK portfolio. Average EONIA for 2010 was 0.44 percent, while it
reached the highest point of 0.87 percent on 30 September 2010.
European Central Bank (ECB) kept maintaining key refunding ratio of 1 percent
throughout 2010. Keeping short-term ratios relatively low, ECB created simultaneously
conditions for an accommodating monetary policy in the region. This oriented investors
towards capital markets that were more liquid and created other conditions for the credit
default swaps prices to continue declining. Establishment of the financial assistance
mechanism, respectively the European Financial Stability Facility, in May 2010, which
aimed at assisting the Euro-zone countries in emergency liquidity needs, it created a
stability in the market making the returns from investment in securities of Portugal, Spain
and Ireland start decreasing in the end of 2010. Liquidity injection in European market to
save Ireland and preparation to intervene in Portugal created a temporary security in
money market. Private investors and institutions benefited from the instable situation,
buying Portuguese and Greek securities which provided high returns.
During this period, CBK invested a small part of assets in debt market in short-term
instruments, generating profits and maintaining a low level of market risk and failure risk.
Commercial banks of EU countries outside the public debt crisis had a stable
performance and satisfactory returns throughout 2010. Among the category with
sustainable performance are included banks of Austria, Germany, France, Netherlands and
Scandinavian countries. Considering their risk return profile, investments in short-term
deposits of CBK were concentrated in the safest banks in this region. Average time horizon
for investments in short-term deposit in 2010 was 9 days.
5.4. Interbank payment System
Interbank Electronic Clearing System
Development of an efficient and safe system for domestic payments, as a key standard of
the financial infrastructure, is one of the CBK primary functions. Interbank Electronic
Clearing System (IECS) operated by CBK is the only interbank payment system in the
Republic of Kosovo. IECS functions as a hybrid system which enables interbank channeling
of a wide range of payment instruments.
80 |