Financial Stability Report No1 20 December 2010 - Banka Qendrore ...

Number 1Financial Stability Reportloans, the slowdown of the creditgrowth led to a lower share ofbanking sector assets to totalfinancial sector assets. In June 2010,the share of banking sector assets tototal financial sector assets decreasedto 77.5 percent, from 79.1 percent inJune 2009 (Figure 9). In the sameperiod, also microfinance institutionsreported a slowdown of credit growth,which was reflected in a slight declineof their share to total financial sectorassets. On the other hand, positiverates of return on KPST investmentsFigure 9. The structure of financial sectorassets, by sector2009during the first half of 2010 contributed to the increase of pension fund assets, whichincreased their share to total financial sector assets to 14.4 percent in June 2010 (12.5 percent in June 2009).The market structure in Kosovo's financial system is different in different sectors (Figure10). While the insurance sector and microfinance institutions have a moderate degree ofmarket concentration, the banking market continues to be characterized by a high degree ofconcentration. The Herfindahl-Hirschman Index (HHI) for the insurance market, in June2010, stood at 1061 points, while for the microfinance institutions sector it stood at 1643points. Regarding the banking sector,Figura 10. HHI for financial sector in Kosovothe HHI in June 2010 stood at 2371points. However, the degree of3,500concentration in this sector has3,000followed a steady decline since 2008. 2,500In June 2010, the HHI for the 2,0001,500banking market was for 252 points1,000lower compared to the previous year. 500The decline in the degree of-Jun-07 Jun-08 Jun-09 jun-10concentration has mainly resultedHHI for banking sector assetsfrom a more pronounced slowdown ofHHI for microfin. institutions assetscredit growth in the large banks,HHI for insurance companies assetswhile small banks recorded higher Source: CBK (2010)rates of credit growth. The decrease ofthe degree of concentration in the banking market is also shown by the decline of themarket share of three largest banks from 82.8 percent in June 2009 to78.9 percent in June2010.Kosovo's financial sector (including CBK) continues to invest a substantial portion of assetsin the external sector. In June 2010, Net Foreign Assets (NFA) of Kosovo’s financial sectoramounted at euro 1.74 billion (43.4 percent of GDP), which represents an annual increaseof 8.6 percent. Financial sector claims on the external sector recorded an annual growth of17.3 percent in June 2010, reaching at euro 2.1 billion. In terms of sector, the structure ofclaims on the external sector is dominated by the claims of CBK that in June 2010composed 57 percent of total claims, followed by the claims of commercial banks (26.0percent) and pension funds 16.7 percent (Figure 11). Regarding the instruments, financial5.112.53.10.279.1Commercial banksPension fundsMicrofinance institutionsInsurance companiesFinancial auxiliariesSource CBK (2010)3.1 0.220104.714.477.5Commercial banksPension fundsMicrofinance institutionsInsurance companiesFinancial auxiliaries26 |