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

Number 1Financial Stability ReportIILNIIL A IEDCL A PvL 0.95 TaxL A IEL* A*0.1PL* A 9.3.3 ResultsAs Table 16 indicates, the ex post lending rate of 12.59% and fees and commissions addingto the borrowing cost 1.99pp make the ex post lending rate in the Kosovo’s banking sector at14.58% for year 2009. The ex post lending rate in the banking sector appears to be highercompared to other countries in the region with an average at 11.14%.During 2009, , the most important contributing factors to the lending rate in Kosovo wereoperating costs followed by the risk costs proxied by provisioning for loan losses. Operatingcosts explain about 4.48pp of total costs incurred by banking sector, followed by risk costswhich add an additional 5.08pp. Funding costs and regulatory costs add additional 3.80pp,while bank profits explain 1.28pp. The structure of ex post costs in the Kosovo’s bankingsector differs from banking sectors of other countries in the region. Unlike Kosovo, whererisk costs and operational costs explain the largest share of ex post costs, the largest item ofex post cost in the banking sectors of region countries appear to be funding costs. InMacedonia, operational costs represent the second largest category of ex post costs, whereasin other countries risk costs represent the second largest category, leaving operational costsin the third place. The dominance of risk costs and operational costs in the overall structureof ex post costs in the Kosovo’s banking sector reflect the higher level of risk that isperceived by banks in Kosovo as well as the lower efficiency of banks. Furthermore banksprofit also plays an important role in explaining the ex post costs for the banking sector ofKosovo and it is much higher compared to the average of the countries in the region.Table 16. Decomposition of intermediation costAverageMacedonia Albania Croatia Serbia foreDescriptionKosovoregion2006 2007 2008 2009 2009 2009 2009 2009 countriesEx-post lending rate 15.66 16.30 15.52 14.58 11.90 12.19 10.18 10.29 11.14Lending rate 13.32 13.30 13.09 12.59 10.74 9.70 9.04 8.49 9.49Fees and commisions 2.35 3.00 2.43 1.99 1.16 2.49 1.14 1.80 1.65Ex post Costs 12.93 13.25 13.50 13.37 8.85 7.85 11.92 12.87 10.37Funding costs 2.30 2.52 2.93 3.36 4.10 2.93 5.17 6.17 4.59Operational costs 5.64 5.37 5.28 4.48 3.99 2.00 1.89 0.42 2.07Risk costs 4.22 4.54 4.37 5.08 0.38 2.55 4.30 6.26 3.37Regulatory costs 0.77 0.81 0.92 0.45 0.39 0.36 0.57 0.01 0.33o/w taxes 0.59 0.61 0.69 0.18 0.02 0.08 0.23 0.00 0.08o/w reserves 0.19 0.20 0.23 0.27 0.36 0.29 0.33 0.01 0.25Memorandum itemsResidual 2.74 3.05 2.02 1.21 3.04 4.34 -1.74 -2.57 0.77o/w Profit 1.88 2.60 2.26 1.28 0.72 0.21 0.82 0.22 0.49Source: Central banks of respective countries and own calculations.80 |