Deposit Insurers of Albania and Kosovo sign the Memorandum of Understanding on Cooperation

To be published on the 05.06.2014

Today, on 4^th June 2014, the Deposit Insurance Fund of Kosovo (DIFK) and Deposit Insurance Agency of Albania, mark an important achievement in signing the Memorandum of Understanding on Cooperation.  The two institutions agreed on cooperation framework which includes exchange of experiences, capacity building and information sharing to achieve effectiveness of their deposit insurance systems in line with best international practice.

In the opening remarks of the Conference, the Managing Director of DIFK, Mrs. Violeta Arifi-Krasniqi stated the importance for deposit insurers to cooperate to achieve effectiveness of their systems as well as to enhance institutional knowledge and expertise.

Governor of the Bank of Albania, Mr. Ardian Fullani welcomed the signing of the agreement and stated that “The signing of today’s agreement is an important step towards deeper integration of financial systems of the Republic of Albania and the Republic of Kosovo. Along with central banks and supervisory authorities of the financial markets, deposit insurance agencies are now an important link of the mechanism for maintaining the security of citizens’ savings and financial stability. In this context, the agreement between ASD and DIFK is a welcomed development in the wake of fruitful cooperation already established between the Bank of Albania and Central Bank of Kosovo.

It will contribute to a more organic coordination of our work together to ensure the safe development of banking and financial markets in our countries. ”

Whereas, Deputy Governor of the Central Bank of the Republic of Kosovo, Mr. Fehmi Mehmeti said that “Since its foundation, in 2011, the Deposit Insurance Fund of Kosovo has played an important role in the functioning of the stabile banking sector. The establishment of the Fund, for the protection of depositors, has added and contributed to the high confidence in the banking system in Kosovo. Obviously the size of the deposit insurance fund is parameter that depends on the level of economic development of country’s economy.  The fund established to protect the depositors, as of end of March 2014 reached to € 23.4 million, which serves as an additional guarantee for financial stability in Kosovo.  In terms of the number of depositors, the fund covers about 94% of depositors in the banking system in Kosovo. This speech will be incomplete, if we do not mention the German support in the development processes of Kosovo, especially in the establishment of the deposit insurance fund. Moreover, after the war German support to the financial sector has been significant.  Speaking on behalf of CBK, we are very grateful to the people and the German state and german companies regarding their contribution to processes in Kosovo.  KfW has made the first stimulus in this direction by making great contribution to the establishment of the Deposit Insurance Fund with the participation of €5 million.

CBK role in this regard has been of key importance in terms of passing the legislation in line with international banking standards and principles, at the same time providing its forecast for the relevant developments of the banking market in Kosovo, resulted in a sound banking sector indirectly enabling the creation of this fund. ”

On behalf of the German Amasadës, Mrs. Henriette Kotter said: “Germania supported the establishment and capitalization of the Deposit Insurance System in order to strengthen citizens’ confidence in the banking sector and help Kosovo meet the conditions for EU approximation. Kosovo was the only EU country that does not provide deposit insurance for three years and now we witness DIFK functioning as a sustainable system of deposit insurance and the protection of small depositors but at the same time contributing to the development the financial system as a key element of economic progress in Kosovo. Germany and Kosovo this year celebrate the 15th anniversary of cooperation that began as an emergency assistance in 1999. Whereas now, was developed in a partnership continued support for sustainable development and support for EU integration. A stable financial sector is a fundamental prerequisite for this development. ”

The General Director of DIA of Albania, Mr. Toni Gogu stated “The signing of the Agreement on the Cooperation with the sister agency is the first for the Deposit Insurance Agency of the Republic of Albania. We cannot sign a Cooperation Agreement with any sister agency, without prior signing with the Deposit Insurance Fund of Kosovo. This agreement brings mutual benefits for both institutions, in terms of sharing experiences and coordinating work and activities for development of schemes in accordance with international standards. “In his speech, Mr. Gogu also underlined that” the EU regulatory framework European deposit insurance schemes are updated to ease the cost to depositors in difficult financial situations. Also, the International Standards of Deposit Insurance (Core Principles) of IADI are under review. In these circumstances, and based on the recommendations of the FSAP missions, that had recently audited financial systems in Kosovo and Albania, DIFK and ASD have new approaches that will require further improvement of schemes in both of our countries. ”

On behalf of the German Embassy, Ms. Henriette Kötter stated that: Germany stepped in to support the establishment and capitalisation of Deposit Insurance Fund of Kosovo in order to strengthen the people’s trust in the banking sector and to meet the requirements toward EU approximation. Kosovo was the only country in Europe without deposit insurance in place and now for three years we are witnessing DIFK functioning as a sustainable deposit insurance system protecting small depositors but as well to contribute to the development of financial system as an important element of advancing the Kosovar economy.

This year Germany and Kosovo are celebrating 15 years of development cooperation. Germany started supporting Kosovo with emergency relief in 1999. Now, the partnership has changed towards sustainable development and support to EU integration. A stable financial sector is a necessary basis for this development”.

The Managing Director, Mrs. Violeta Arifi-Krasniqi, presented the annual report for 2013 by giving an overview of the deposit insurance system as well as main activities and achievements.  The main highlights included, the achieved capital contributions as projected in support of the increase of the deposit insurance limit to €3,000, effective from 1^st Jan 2014, provided by the German Government (through KfW).  Alos, the last tranch of the capital was paid by the Government of Kosovo in line with three partite Financing and Project Agreement for the Capitalization and Establishment of the Deposit Insurance System in Kosovo.  Deposit Insurance Fund has reached to nearly €23 million after the receipt of total €17.5 million capital contributions, as well as premium payments from member banks, where total of €11 million was provided by the Government of Kosovo (through Ministry of Finance) and €6.5 million from the German Government (through KfW) for the purpose of establishment and support the increase of deposit insurance limit respectively.

Similar trend of growth of deposits was noted, indicating continues confidence of the public in the banking sector, where deposits in the banking sector in Kosovo grew by 8.2% to €2.4 billion (based on specific reporting of member banks to DIFK) as well as insured deposits by 8.5% to €349 million (at deposit insurance level of €2,000), compared to end of Dec 2012.  Currently, at deposit insurance level of €3,000, DIFK insures just over 835 thousand depositors (or 93.3%) in eight member banks accounting for a total insured deposit volume of €423 million (or 17.6%) as of 31 December 2013.  Further highlights of Mrs. Arifi-Krasniqi included, the achievement at international level of DIFK’s full membership in International Association of Deposit Insurers (IADI), a venue for deposit insurance topics and research, stating the benefits of the membership in building its internal capabilities through the shared knowledge, practices and network of deposit insurers around the world.

Public awareness activities have been DIFK’s focus throughout the year achieved through provision of mandatory information to depositors on deposit insurance.  In this regard, all member banks have been supplied with individual Membership Certificate’s which are required to be displayed in all business premises open for clients.  Similarly, information leaflets on deposit insurance specifics are available for public in all business premises open for clients.

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 3,000 (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 provided by Global Banking Development Solutions (GBDS) 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 DIFK with regard to the exchange of information and other issues of mutual interest is regulated by a Memorandum of Understanding. The Central Bank has been the initiator of the establishment of the scheme and provided intensive human and technical resources to support the establishment as well as the start of the operations of DIFK.

Deposit Insurance Agency of Albania

Since 2002 the Deposit Insurance Agency is the sole administrator of the deposit insurance scheme in the Republic of Albania. The main objective ADIA is to protect individual depositors and help in maintaining financial stability. ADIA insures deposits of second tier banks that operate in Albania and compensates in case of bank failure up to ALL 2.500.000 per depositor in accordance with the provisions of the law. Through its role, ADIA contributes in strengthening public confidence in the banking system and the national financial system in general. The very recent approval of the new law ‘On Deposit Insurance’ by the Albanian Parliament also provides for the inclusion in the deposit insurance scheme of Savings and Credit Associations upon fulfilment of certain criteria as determined in the law. This is considered as a major achievement in light of safeguarding the financial stability by extending the deposit insurance to the depositors of financial institutions, other than banks. Deposits in SCAs are insured up to ALL 2.000.000 per depositor in case of failure or bankruptcy. ADIA is member of the Financial Stability Advisory Group, along with the Ministry of Finance, Bank of Albania and Financial Supervisory Authority.

KfW Entwicklungsbank (The German Development Bank)

KfW Banking Group is one of the leading promotional banks in the world. KfW carries out 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 and over 15 years committed over €269 million. The Financial Sector, for which the German Federal Government since 1999, through KfW, committed more than €46 million, is a focal point within the scope of German Financial Cooperation with Kosovo.

In order to put the financial services in the institutional footing, German Financial Cooperation, carried out by KfW supported foundation of ProCredit (former MEB) as a first post-was bank in 2000 when the banking sector in Kosovo needed to be rebuilt almost completely. The bank is now successfully operating as largest bank in Kosovo. Other institutions establishment was supported by KfW as EFK, EFSE and GGF which raise the amount of funds available for Kosovo.

The other important pillar of KfW support was provisioning and supply of funds for housing refinancing to support rehabilitation of the housing sector. Furthermore, German Government through KfW is committed to assist Kosovo in the efficient and sustainable use of energy by introducing a new product on energy efficiency in banks. KfW will support rural areas by providing financing mainly for investments and thus contribution to employment generation and improvement of living conditions. This and the other projects in preparations demonstrate German Government commitment to support Kosovo economy.

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