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

Financial Stability ReportNumber 1Based on the EBRD methodology (NLIS 2003), a survey with four banks operating inKosovo was conducted aiming at providing an up-to-date assessment on the enforcement ofcreditor rights in the lender-borrower relationship in Kosovo. The survey results suggestthat, compared to year 2005, the overall picture for the enforcement of creditor rights inKosovo is broadly the same. Among the most important factors affecting the enforcementprocess, according to banks’ responses, are the inefficiency of courts, corruption and debtorobstruction. Regarding the inefficiency of courts, the main complaints of respondents werethat courts lack the expertise and resources to do their job. Therefore, the enforcementprocess would be facilitated if specific commercial courts or specialized judges were to dealwith commercial disputes. The inefficiency of courts is reported to cause delays in theprocess of contract enforcement and, to some extent, may have induced the culture of nonpaymentby borrowers, which can be expressed through the increasing debtor obstruction inthe enforcement process. However, the results indicate that Kosovo compares well withcountries in the region and other transition economies with respect to the enforcement ofcreditor rights. The survey was also extended to cover other stages prior to legalenforcement such as voluntary compliance, bargaining, self-help and the market forcollateral. Results show that a substantial part of default cases never reach the court fordispute resolution but is solved by voluntary compliance, thus emphasizing the role of thecredibility of institutions in the enforcement process.| 91