Press release from the Deposit Insurance Fund of Kosovo (DIFK)

Successful ongoing cooperation in supporting the development of the deposit insurance system in Kosovo

Today, the Deposit Insurance Fund of Kosovo (DIFK) that started its operations two years ago presented its Annual Report for 2012. The Managing Director of DIFK, Mrs. Violeta Arifi-Krasniqi, explained that the Fund’s achieved to increase its capital level in accordance with its business plan with support of the Government of Kosovo, German Government (though KfW) and World Bank (on behalf of IDA). Like in the previous years, the deposits in the banking sector in Kosovo marked a steady growth increasing by 8.47% to EUR 2.2 billion compared to Dec 2011. DIFK insures just over 910 thousand deposit accounts (or 93%) in eight member banks accounting for a total deposit amount of EUR 321 million (or 14%) as of 31 December 2012.

The Deposit Insurance Fund has reached EUR 17 million by the end of December 2012, whereas from April 2013 reached EUR 19.9 million. Mrs. Arifi-Krasniqi further highlighted that thanks to the ongoing support of its main donors, the Government of the Republic of Kosovo (GoRK), Federal Republic of Germany (through KfW) and the World Bank (on behalf of IDA), the paid-in capital of the Fund has now reached its committed target level of EUR 15.5 million in line with three partite Financing and Project Agreement for the Capitalization and Establishment of the Deposit Insurance System in Kosovo. German Government (through KfW) provided a grant of EUR 4.5 million for the capitalization of the Fund and will provide additional EUR 2 million having singed a new Financing Agreement on 12.06.2013 to support the gradual increase of the deposit insurance limit. Additionally the World Bank provided a soft loan of EUR 2.9 million to support the commitment of EUR 11 million of the Kosovan Government which has been fulfilled April 2013. Last year, the Parliament of Kosovo adopted important improvements of the Kosovan Legislation on deposit insurance scheme in which the compensation period has been reduced from 60 to 30 days and the deposit insurance limit per depositor has been doubled in the medium term. The Chairperson of the Management Board of DIFK, Mr. Gani Gerguri “thanked the international and local institutions for effective coordination and efficient functioning of the deposit insurance scheme and noted that parallel to continued growth and sound banking system the Deposit Insurance Fund continued to increase.” “Minister Beqaj in his speech highlighted the importance of Deposit Insurance institution in ensuring a credible financial sector and sustainable economic environment in the country. He further mentioned the support that the Ministry has provided in establishing DIFK in cooperation with German Government and the World Bank. He also expressed his appreciations to international partners and committed a continued support for the DIFK further development.” While, Governor Mr. Bedri Hamza stated that: “The Central Bank of the Republic of Kosovo pays special attention in protecting the interests of depositors and in accordance with its legal obligations is fulfilling its mission in relation to the Deposit Insurance Fund.” On behalf of the German Embassy, Ms. Ms. Henriette Kotter stated that: “Germany has one of the most comprehensive deposit insurance systems, therefore, the German Government is pleased to contribute financially and with its expertise to the establishment and the development of the Deposit Insurance Fund of Kosovo. We highly appreciate the commitment and contribution of the Government of Kosovo to the DIFK and the close cooperation between the involved institutions. The German government has been supporting the Deposit Insurance Fund since 2007. In 2013, the German government has increased its contribution with a grant of 2 million EUR”. Whilst on behalf of the German Development Bank, KfW, Mr. Rene Eschemann stated amongst other that “The Deposit Insurance Fund is a young but very important institution to deepen the confidence of the people in the Kosovar banking system. With today’s signing of the increase in the Fund’s capitalization by 2 million EUR provided by the German Government through KfW the insurance system is becoming ready for the future. We are very satisfied with the performance of the director and the team of DIFK and with the trustful cooperation with the Ministry of Finance and the Central Bank of Kosovo”. Ms. Blerta Qerimi on behalf of the World Bank in her speech stated that: „ The Deposit Insurance Fund further strengthens the market’s confidence into Kosovo’s banking sector and supports its ongoing process of modernization. For this reason, deposit insurance is one of the key components of World Bank Financial Sector Strengthening and Market Infrastructure Project. The World Bank has provided financing of 4 million USD as seed funding to Deposit Insurance Fund of Kosovo (DIFK). An efficient deposit insurance scheme is essential to ensure orderly bank resolution. Moreover, the existence of such a scheme is critical to maintaining public confidence in the banking sector, as the financial crisis has illustrated and the presence of such a fund is also a requirement for the EU accession. Further technical assistance is provided to the Deposit Insurance Fund were an institution building plan has been developed jointly with KFW to enable DIFK to reach compliance with the Core Principles for Effective Deposit Insurance System adopted by the Basel committee and the International Association of Deposit Insurers (IADI)“. On the other hand Mr. Robert Wright (The Chairperson of the Bankers Association) highlighted importance of establishment of the DIS and collaboration stating that: „Since the establishment of DIFK in May 2011, the Kosovo Bankers Association and its members have welcomed the creation of a fund for insuring the deposits of the citizens of Kosovo. To ensure a successful implementation, KBA has created excellent working relationships with DIFK to help create a scheme that is in line with global best practice and which will be of great benefit to all depositors in the Kosovo banking system“

Deposit Insurance Fund of Kosovo (DIFK) The Deposit Insurance Fund of Kosovo (DIFK) manages the deposit insurance system in Kosovo with main mandate to insures depositors and guaranteeing compensation in case of a license revocation and closure of a bank by the Central Bank of the Republic of Kosovo (CBK). DIFK also supports CBK in maintaining the stability of the financial system by maintaining depositors’ confidence in the banking sector. The Fund insures deposits of natural and legal persons up to the maximum coverage level of EUR 2,000 (increasing to EUR 3.000 as of 1.1.2014; increasing to EUR 4.000 as of 01.01.2016; and increasing to EUR 5.000 as of 01.01.2018) and compensates each insured depositor within 30 days in case of license revocation and closure of a bank. From 2012 until 2014 DIFK is receiving technical advice through the German consulting firm GBDS Global Banking Development Solutions fully financed by the German Government (through KfW).

Central Bank of the Republic of Kosovo (CBK) The Central Bank of the Republic of Kosovo (CBK) has the primary objective to foster and to maintain a stable financial system in Kosovo, including a safe, sound and efficient payment system. In licensing, supervising and regulating the Kosovar banks the Central Bank pays special attention to the protection of depositors’ interests. The Cooperation between the Central Bank and the Fund with regard to the exchange of information and other issues of mutual interest is regulated by a Memorandum of Understanding. The Central Bank has provided intensive human and technical resources to help establishing the Deposit Insurance Fund. KfW Entwicklungsbank (The German Development Bank) KfW Banking Group is one of the leading promotional banks in the world. KfW Development Bank is in charge of the German financial cooperation on behalf of the German Government to implement its goals in international cooperation with developing and emerging countries. KfW aims to implement projects to the needs of the countries and their populations. In Kosovo, KfW is supporting projects in a various sectors such as water, energy and financial sector. Since 1999 the German Financial Cooperation through KfW has committed funds amounting to 247 million EUR. One of the most important projects in the financial sector was to support founding the Micro Enterprise Bank after the end of the conflicts in 2000 when the banking sector in Kosovo needed to be rebuilt almost completely. The bank is now successfully operating as ProCredit Bank Kosovo. Another measure of support in this time aimed at the rehabilitation of damaged residential buildings – urgently needed since many buildings suffered from damages during the conflict. The German Government, through KfW, supported the restoration of more than 40.000 houses over 10 years. These and many other projects demonstrate Germany’s and KfW’s long lasting commitment to support Kosovo’s economy and people.

About the World Bank The World Bank Group has two ambitious goals: End extreme poverty within a generation and boost shared prosperity.

The World Bank Group is one of the world’s largest sources of funding and knowledge for developing countries. Since 1999, the World Bank has provided and/or managed roughly US$400 million to Kosovo through more than 30 operations, including trust funds.  Currently, there are six active lending operations with commitments totalling US$68.9 million and two trust funds with total commitments of US$8.9 million. Since Kosovo joined the World Bank Group as a full member only in June 2009, all previous Bank-supported projects had been financed through grants from a variety of sources, principally the Bank’s net income, the Trust Fund for Kosovo, the Post-Conflict Fund, and the International Development Association (IDA).

The World Bank’s program in Kosovo is anchored in its four-year CPS FY12–15, following a series of Interim Strategy Notes. This document provides the Word Bank Group and Kosovo with a framework of cooperation. In support of Kosovo’s EU integration objective, the CPS aims to provide support to enable the authorities to (i) accelerate broad-based economic growth and employment generation; and (ii) improve environmental management. As such, the World Bank-financed projects have been designed to strengthen the business climate and improve competitiveness. These included the (i) the Financial Sector Strengthening and Market Infrastructure Project; (ii) the Public Sector Modernization Project; (iii) the Real Estate Cadastre and Registration Project; (iv) the Agriculture and Rural Development Project; and (v) the Institutional Development for Education Project.

Bankers Association

Kosovo Bankers’ Association (KBA) is the voice of the banking industry in Kosovo. It cooperates with the Government, the Central Bank of the Republic of Kosovo, media, and the public opinion with the aim of supporting a healthy banking industry, which promotes the long-term economic development in Kosovo. KBA facilitates the cooperation between banks while offering a single platform for mutual lobbying and discussion of new initiatives; identifies and influences the legal and regulative initiatives; coordinates common activities for banks and promotes banking activities in front of the wide audience. KBA represents seven commercial banks and one microfinance institution. Membership is also open for non-bank financial institutions. Established in 2002, the Association is a main reference point related to the issues that deal with the banking sector in Kosovo.