Ahmet Ismaili: Western Balkans towards the Single European
Payment Area (SEPA)
Speech by Mr Ahmet Ismaili, Governor of the Central Bank of the Republic of Kosovo,
at the event "Western Balkans towards SEPA", organised by the Bank of Albania,
Tirana, 28 February 2024.
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Dear Mr. Mete, Minister of Finance of Albania
Dear Mr. Sejko, Governor of the Central Bank of Albania
Ministers of Finances of WB6,
Governors of Central Banks WB6,
World Bank Representatives,
Ladies and Gentlemen,
I would like to thank the Bank of Albania for organizing this event on the Regional
Ministerial "Western Balkans towards SEPA" in the framework of the Regional Summit
on Growth and Convergence Plan and for the invitation to Central Bank of the Republic
of Kosovo, which we have positively accepted.
It is my pleasure to be here at such an event with the opportunity to share our current
activities towards SEPA.
We are living in a time when all aspects of our lives are advancing at such a rapid pace
of technological development, and the financial industry is advancing at the same pace.
In the dynamics of global development, the financial system in Kosovo is facing a rapid
change in the field of innovation and migration towards digital payments.
A developed financial payment system, where payments are made in a cost-effective
and time-efficient manner, makes trade cheaper, enables competitive businesses to
grow and provides consumers with easier access to goods and services. At the same
time, a developed payment system ensures the protection of the integrity of the
financial system and the euro currency, the reduction of the negative effects of the
phenomenon of counterfeiting, the protection of consumers and the promotion of
market practices, the reduction of the effects of money laundering activities and terrorist
financing, and the improvement of access to financial services and financial inclusion.
In line with the Stabilization and Association Agreement and the Berlin Process, the
reform process and the development of the payment system through the development
of fast local payments and the integration of the payment system at the regional level
will also accelerate access to SEPA.
CBK, in the Strategic Plan 2024-2028 has planned several important activities which
are related with CBK and the financial industry which are in line with the current
developments in the area of digitalization.
Within the activities of CBK to adopt toward digitalization as main activities are planned
the following:
Advancement of cybersecurity, heightened preparedness for cybersecurity risks,
and the establishment of greater virtual information storage capacities;
Digitalization and automation of operations, support for electronic signatures, and
internal authorization processes; and
Advancement and consolidation of the CBK's internal records, as well as
interfacing with systems of institutions for data exchange in the best public interest.
CBK, within the mandate as the authority for licensing, regulation and supervision of
financial institutions, has planned the following activities:
Strengthening the supervision of systems and systemically important payment
instruments, including FinTech;
Advancement of the regulatory and supervisory framework for AML/CFT and
compliance;
Development of infrastructure, enhancement of security and efficiency for
payments and securities clearing, collateral management, and system interface;
Advancement of the legal and regulatory framework in relation to payment
services, with the aim of harmonization with European Union legislation, PFMI,
and other international standards;
Development of technical infrastructure to facilitate fast payments 24/7, creation of
the national QR Code, and standardization of API for system interconnections;
Advancement of the regulatory framework for Anti-Money Laundering and
Combating the Financing of Terrorism in connection with payment services;
Facilitation of access to International Payment Platforms;
Reduction of cash payments and promotion of electronic payments;
Creation of opportunities for access to the payment system for non-banking
service providers, as well as enabling the possession of IBAN to enhance access
to finance within the concept of "payment account"; and
Advancement of the legal and technical infrastructure of the CBK for membership
in the SEPA Payment Scheme and access to the Target Instant Payment
Settlement of the European Union (TIPS).
In this regard, within the planned activities of CBK we have:
Participated in high-level meetings at the European Central Bank (ECB) in
Frankfurt, where the ECB, within the framework of supporting the EU project for
the modernization of payment systems in the Western Balkans and the objectives
of the G20, is supporting concrete initiatives such as the interconnection of
payment systems and the integration of our region into the European Union
systems, and we are in constant contact for further developments.
In January 2024 we have reinitiated the National Payment Council to support
payment reforms through inclusion and increasing of cooperation among market
participants in the payment system in the Republic of Kosovo; and
Defined a national plan for financial inclusion and reducing the use of cash where
the activities of interested parties will be defined and agreed to increase access,
use of payment accounts and electronic payment instruments and reduce cash, in
order to reduce the cost of payment services for the most efficient flow of
transactions as well as other positive effects on the economy.
We have created the possibility for access to the payment system of non-bank
financial institutions, as well as the possibility of having an IBAN, to increase
access to finance, within the concept of "payment account", where we have also
approved the relevant regulation.
We have changed the Organizational Structure, where the responsibility of
Payment Institutions and Electronic Payment Institutions supervision has been
added to the MFI / NBFI Supervision Division, the IT Systems Supervision
Division has been established, within the Credit Registry Division, the
responsibility of Register of Bank Accounts, as well as the Department of
Consumer Protection was established where, in addition to the Division of
Consumer Complaints of Financial Services, the Division of Supervision of Market
Practices was also established.
We are in the process of finalizing the draft law on Payment Services, in
compliance with EU Directives such as PSD2 (Payment Services Directive 2),
EMD (E-money Directive), PAD (Payment Account Directive), and Interchange
Fees, where at the beginning of February we have organized jointly with the
World Bank and Financial Institutions the two-day workshop in order to increase
knowledge about payment services based on the most advanced developments in
this field.
The Law on the Anti Money Laundering will also be revised and the relevant CBK
regulations will be amended in order to fulfill the necessary criteria in this field
We are in the process of building infrastructural capacities and human resources
to ensure that systems, equipment, knowledge, skills and personnel tools remain
relevant and effective in overseeing the risks of new technologies and innovative
business models.
We have approved the regulation on cash operations as one of the basic criteria
towards membership in the SEPA Payments Scheme and access to the European
Union's Fast Payments System (TIPS).
Recently we are in contact with Central Bank of Italy (Banca d'Italia) and we are
interested in gathering insights on the current status of the TIPS clone project, its
features, potential implementation in our domestic context, and, possibly,
associated costs.
We are also working to increase the awareness in our institution and to the supervised
institutions for the risks that are linked with digitalization.
Cyber intrusions pose a risk to the stability of national and international financial
systems due to their potential cross-border spillover effects, and are becoming more
complex as a result of increasing digitalization, growing dependence on third parties,
and geopolitical tensions. Strengthening cybersecurity in the financial sector is therefore
a high priority, particularly for financial institutions and for the financial stability of the
country.
During the conferences and workshops organized, the CBK has also encouraged all
financial institutions to have effective governance structures and risk management
processes, risk management practices and processes in place in relation to outsourcing
services and to have qualified personnel to monitor and oversee their outsourced
activities, including operational risk management, ongoing monitoring and proper
execution of contracts with outsourced service providers that define each party's
responsibilities, agreed service levels and audit rights.
I would like to take this opportunity to thank our international partners, such as the IMF
and the World Bank, for their cooperation and coordination, especially the World Bank
which has supported us in recent years through the SECO-funded Payments and
Remittances Program and the European Union-funded Western Balkans Payment
System Modernization Project, administered by the Council for Regional Cooperation
(RCC).
Let me conclude by reiterating that the development of the national payment system of
Kosovo through the possibility of "instant" payments (24/7), as well as the connection to
the TIPS system, as a goal of the CBK, if achieved, will have a great impact on the
economy of our country, the region, the Diaspora, as well as the circulation of payments
for commercial exchanges with the EU, as the largest trading partner of the Republic of
Kosovo, with an importance for the free movement of capital, services and products,
including the free movement of people from Kosovo through the liberalization of visas
from January 1 this year.