€24 million to further strengthen financial sector and investment climate
The European Bank for Reconstruction and Development (EBRD) is extending a €24 million stand-by credit line to the Deposit Insurance Fund of Kosovo (DIFK), an independent public institution with the objective to protect small depositors from loss in case of bank failure. The credit line is fully guaranteed by the Republic of Kosovo.
If and when required, the stand-by credit line will provide immediate funds to DIFK to fulfil its mandate in compensating the insured depositors. It is part of DIFK’s contingency financing instruments, which ensures prudent coverage of insured deposits in support of the legally prescribed gradual increase of the coverage limit per depositor. This stand-by credit line follows on from the first stand-by credit line made available in 2013, confirming the EBRD’s continuous support to DIFK.
Effective deposit insurance systems are crucial for a well-functioning banking system. By providing depositors with insurance for their deposits, DIFK contributes to Kosovo’s financial stability by increasing depositor confidence in Kosovo banks. Well-functioning deposit insurance funds encourage households to deposit their money in these banks and decrease the risk of a run on banks in times of crisis.
Avdullah Hoti, Minister of Finance, said: “The Ministry of Finance has supported the deposit insurance fund since its development in order to contribute towards the well-being of the financial system in Kosovo. The second credit line of €24 million agreed with the EBRD will strengthen the financial sustainability of DIFK and will support the increase of the amount of the level of deposits insured to Kosovo citizens. Therefore, as a government we will continue our support towards the further strengthening of our financial system in Kosovo.”
Elena Petrovska, EBRD Head of Kosovo said: “This is an important transaction for us because it allows the EBRD to continue supporting DIFK in meeting its objective to protect small depositors, as well as to support the government and the Central Bank of Kosovo in meeting their objective to foster the soundness, solvency and efficient functioning of a stable, market-based financial system.”
Violeta Arifi Krasniqi, Managing Director of DIFK, added that the second stand-by credit line with the EBRD has enabled DIFK to approach the fulfilment of recommendations from the International Association of Deposit Insurers’ (IADI) assessment of compliance with the Core Principles, specifically Core Principle 9 on establishing sufficient emergency funding arrangements. Today, with full support from the Ministry of Finance, on behalf of the government of Kosovo, we have managed to achieve this arrangement– and we take this opportunity to convey our appreciation for the support provided.”
The DIFK was established in 2011 to manage the deposit insurance system in Kosovo. Its main mandate is to compensate insured depositors in case of bank failure and support the central bank in maintaining financial stability through improved depositors’ confidence in the banking sector. The DIFK insures deposits of individuals and legal entities up to the maximum coverage level of €4,000 (increasing to €5,000 as of 1 January 2018).
To date, the EBRD has invested more than €220 million in 51 projects in Kosovo. The Bank is active in many sectors of the economy and its strategic priorities in the country aim to promote inclusion, green economy, economic resilience and regional integration.