CBK (Central Bank of Kosovo) and its Impact on Banking and Financial Sector

Abstract

In Economic development of every country, banking and financial sector play a major role. 
There is a strong link between bank and finance sector and the economic growth and it means that in 
each country should exist a strong and independent Central Bank, which has its impact on banking and 
finance sector. 
We find that banking crises tend to emerge when the macroeconomic environment is weak 
in particular, low GDP growth is significantly and robustly correlated with increased risk to the banking 
sector. 
However, the slowdown in economic growth in most countries of the region as well as in the euro area 
has influenced the economy of Kosovo to slow the pace of growth compared with the previous year, 
marking an increase about 3.8 percent. External sector is regarded as the most influential factor in 
slowing economic growth as a result of the decline in exports, the marked fall of foreign direct 
investment as well as easy to fall recorded deliveries from immigrants.   
Experience from past financial crises, suggests that lasting recovery requires a review of the policies 
and procedures of banking and financial sector and in particular of Central Bank, also our country need 
to come out with a clear view of what kind of coordination device they want to “invent” in order to be more 
efficient in control and monitor the banks in particular and the economy in general. 
Moreover, the economic outlook for the entire region is clouded by the crisis in the euro area. Current 
projections are for a pronounced drop of growth in 2012, with further downside risks, so in this paper I 
will focus more on the points that the central bank should take care for sustainable and stable 
development of the economy.