fehmi mehmeti : the banking sector is able to withstand possible negative shocks speech by mr fehmi mehmeti, governor of the central bank of the republic of kosovo, at the 20th anniversary of the establishment of the kosovo banking association, pristina, 3 november 2022. * * * honoured chairperson of the board of the association of banks mr. lumezi, honoured executive director of the association mr. balija, honoured representatives of financial institutions, dear participants, ladies and gentleman, on behalf of cbk, i congratulate you on the 20th anniversary of the establishment of the association of banks of kosovo and thank you for your cooperation during these years. both throughout the world and in kosovo, the last few years have been quite challenging and characterized by high uncertainty, for the financial system and for the country's economy. as a result of the adequate regulatory framework as well as high supervisory standards, the pandemic situation found the banking sector in kosovo with high levels of capital and liquidity as well as very good quality of assets. also, the prudent measures undertaken by the cbk in cooperation with the financial institutions operating in kosovo have been shown to be very effective in maintaining financial stability and minimizing the consequences for the country's economy in general. this careful and proactive approach has made the banking sector go through this rather difficult period without suffering serious consequences, and today we have a banking sector that has in no way become a burden to the state, on the contrary, it is playing a very important role in lending to the economy and is serving as one of the main pillars of the stability and development of the country's economy. bank lending continues to be a very important and stable source of financing for households and businesses in kosovo. the banking sector, despite the increased risks, has continued to increase lending and maintain the level of sustainability. the value of bank loans until september 2022 has reached 4. 2 billion euros, marking a significant annual increase of 18. 5 %. inflationary pressures, already elevated as a result of post - pandemic developments in the global economy, are now characterized by a marked increase as a result of russian aggression in ukraine. inflationary pressures certainly pose a challenge to financial stability, as they directly affect the solvency of citizens in conditions where incomes are not corrected for inflation. 1 / 3 bis - central bankers'speeches therefore, in this period of geopolitical shocks, we must especially pay attention to

that report, but at the same time it has assessed that insurance companies should be allowed to adjust category i tariffs for the rate of inflation incurred during the period 2002 - 2018, adjusted for changes reflected in the corporate income law, so that these insurance rates best reflect the current conditions of the economy. this decision of the cbk had prompted various reactions. however, we urge you not to misinterpret this decision, which has adjusted prices only for rising inflation, neglecting the benefits that the insured will have in the future and the impact on enhancing financial stability. this adjustment is also temporary as the cbk plans to liberalize the market of compulsory thirdparty liability insurance in the coming year. * * * another important sector of the financial system is the sector of microfinance institutions and nonbank institutions, which is continuing to accelerate the pace of lending. in this way, this sector is increasingly contributing to increasing competition in the credit market and improving access to finance. the total value of loans of this sector in october, 2019 amounted to euro 217. 1 million, marking an annual growth of 22. 2 %. during this year, effective interest rates decreased from 23. 1 % to 20. 3 %. faqe 3 nga 5 recently, as you are informed, cbk revoked the licenses for two institutions : mfi “ iute credit kosovo ” jsc and nbfi “ monego ”, which over the years of operating in our market, have consistently deviated from their business plans, on the basis of which they obtained licenses to operate in kosovo, thus bringing something to our market other than what they had promised they would bring. the most significant and disturbing deviation from their business plans, on the basis of which they obtained the license, relates to the interest rates that these institutions have applied to the loans, which have resulted to be multiple times higher with the norms that these institutions had foreseen in the license application documentation, which represents a very important element in the decision - making process for approving licenses for financial institutions. regarding this process, we are seeing different forms of public pressure on these decisions, but we would like to reiterate that the cbk has acted in full compliance with its legal mandate and are convinced that our action is fair, therefore, no form of public pressure cannot lead to a review of these decisions. we fully respect the right of the parties to pursue legal ways to appeal these decisions, and we urge the parties affected