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

Financial Stability ReportNumber 1sector claims on the external sector mainly consist of deposits (45.8 percent), followed bysecurities (27.1 percent of total claims) and loans (12 percent of total claims).In June 2010, financial sectorliabilities to the external sectoramounted at euro 349.3 million (euro178.6 million in June 2009). Theincrease of liabilities to the externalsector in is mainly attributed to themembership of the Republic of Kosovoin the IMF (IMF account and SDRallocations) in year 2009. 4 Thestructure of financial sector liabilitiesto the external sector primarilyconsists of the banking sectorliabilities to financial institutionsabroad (40.8 percent of totalFigure 11. The structure of financial sectorinvestments, by sector21.1liabilities). Regarding the structure of banking sector liabilities to the external sector, loansthat these institutions have received from financial institutions operating abroad representthe largest category (44.4 percent of total), followed by non-residents' deposits atcommercial banks operating in Kosovo (21.7 percent).Kosovo’s financial sector has no claims on the government, while liabilities to this sector,which mainly consist of government deposits at the CBK, reached at euro 940.7 million inJune 2010 (euro 900.6 million in June 2009). Government deposits at the CBK (includingKosovo Privatization Agency deposits) in the reporting period decreased to euro 802.6million (euro 899.1 million in June 2009), reflecting the increase of governmentexpenditures during this period. Since October 2009, it is observed an icrease in thebanking sector liabilities to the government, mainly due to the transfer of PTK dividend tothe government. In order to avoid a potential liquidity shock to the banking sector, theamount that was transferred to the government continued to be held as deposits incommercial banks. Financial sector claims to the real sector continued to be dominated byloans issued by commercial banks. Claims to the real sector amounted at euro 1.5 billion,an annual growth of 10 percent. Liabilities to the real sector are mainly composed ofdeposits in commercial banks.12.1200966.7CBKCommercial banksPension fundsMicrofinancial institutionsInsurance companiesSource: CBK (2010)26.016.7201057.0CBKCommercial banksPension fundsMicrofinancial institutionsInsurance companies5.2. The banking sector exposure to other financial institutionsThe banking sector continues to have a low level of exposure to other sectors that operatewithin the financial system of Kosovo, while the interbank market is virtually inexistent.Other financial institutions' deposits in commercial banks operating in Kosovo representonly 4.8 percent of total banking sector deposits. These deposits mainly consist of thedeposits of insurance companies held at commercial banks. Also, the credit exposure of thebanking sector to other financial institutions remains at a very low level, with only 0.3percent of total banking sector loans. Majority of these loans are issued to microfinanceinstitutions (68.6 percent), followed by insurance companies, (29.2 percent).4 According to statistical standards, the value of SDR and the IMF quota are registered on gross basis, on the asset and liability side.| 27