The EBRD is providing a €10 million standby credit line to the Deposit Insurance Fund of Kosovo (DIFK). The credit line, fully guaranteed by the Republic of Kosovo, represents an important step in the development of the local banking sector by strengthening the security of financial institutions and consequently boosting depositors’ confidence.
The credit line, fully guaranteed by the Republic of Kosovo, will provide immediate funds to DIFK – if and when required – to fulfill its mandate in compensating its depositors. As standby financing the facility will be substantially more cost effective than as a loan.
The credit line is a part of DIFK’s contingency financing mechanism. It will ensure adequate coverage of insured deposits during the scheduled phased coverage increase from currently €2,000 to €5,000 in 2018.
Effective deposit insurance systems are a crucial part of well-functioning banking sectors. By providing depositors with insurance for their deposits, the DIFK contributes to Kosovo’s financial stability by increasing confidence in local banks. Well-functioning deposit insurance funds encourage households to deposit their money in these banks and decrease the risk of run on banks in times of crisis.
DIFK is an independent public entity with the objective to protect small depositors from losses in case of a bank failure. It is responsible for the management of the Deposit Insurance Fund and reports to the Central Bank of Kosovo.
Besim Beqaj, Minister of Finance of the Republic of Kosovo, said: “We are very happy to sign the first project for the Government of the Republic of Kosovo with the EBRD. I am confident this will be the first of the many more joint undertakings in support of our country’s development.”
Claudio Viezzoli, EBRD Director, Western Balkans, said: “The Deposit Insurance project is very important as it supports the development of the local banking market infrastructure. Almost exactly one year after Kosovo’s membership in the EBRD we are proud to sign this project, which will mark an annual business volume of our Bank in the country in 2013 of €22 million through ten projects.”
Violeta Arifi Krasniqi, Managing Director of DIFK, added: “The project is very important for DIFK not simply because of the provision of standby liquidity. It also formalises our relationship with the EBRD and we believe it is only the start of a long-standing future cooperation.”
Kosovo became a member of the EBRD on 17 December 2012 and on 1 May 2013 the Bank adopted its first full country strategy. However, private sector projects in Kosovo were eligible for EBRD support since 1999 via dedicated externally managed regional funds and projects and via the Bank’s regional facilities for the Western Balkans. Within this scope, since 1999 the Bank had signed some 39 projects in Kosovo with a cumulative EBRD investment value of approx. €90 million.