Support for the alignment of CBK’s regulatory framework and supervisory practices with EU prudential standards in the banking sector

Overview
Project Summary Document

TCRS 20615

Status Approved

Location

Kosovo

Business Sector

Financial Institutions

Notice Type

Public

PSD Disclosed

19 Dec 2024

Project Description

Rationale

In the aftermath of the financial crisis, the European Union (EU) introduced a number of regulatory changes aimed at reducing the underlying risks in the EU banking sector. The impact of EU regulatory changes on South-Eastern European countries and the alignment of their bank regulatory frameworks towards EU prudential standards have been the focus of a dedicated work stream under the Vienna Initiative (VI) platform, in which the European Bank for Reconstruction and Development (EBRD) plays an active role.

Kosovo has made significant strides in aligning the national regulatory framework and supervisory practices with EU standards as part of its broader efforts to integrate with the European Union. The country’s framework is largely harmonized with the EU's Capital Requirements Regulation (CRR 575/2013) and the Capital Requirements Directive (CRD 2013/36). In particular, the definition of capital and its instruments is aligned with the EU’s Capital Requirements Regulation (EU 575/2013), though local specifics have led to some variations in the capital ratios. Currently, banks must maintain a Common Equity Tier 1 (CET1) ratio of at least 4.9%, Tier 1 Capital of 9.0%, and total capital (Tier 1 + Tier 2) of 12.0% of risk-weighted assets at all times. Additionally, a 2.5% capital conservation buffer equal to 2.5% of risk-weighted assets on an individual and consolidated basis is required for CET1.

The leverage ratio in Kosovo is aligned with the EU’s requirement of 3%. Similarly, the liquidity coverage ratio and the net stable funding ratio follow the EU’s approach. The market risk requirements are also aligned with the EU’s Capital Requirements Regulation (EU 575/2013). Due to the limitations of the local market, only the standardized approach for credit risk has been adopted, with the simplified approach applied where possible. The treatment of securitization positions is not currently included in the regulatory framework. Operational risk requirements are based on Basel II standards. Additionally, the Central Bank of Kosovo (CBK) has introduced requirements for the internal capital adequacy assessment process and is working on implementing the internal liquidity adequacy assessment process and the supervisory review and evaluation process.

Significant progress has been made in developing the crisis management framework. The draft Law on Banks introducing a recovery and resolution framework for credit institutions and investment firms aligned with the Bank Recovery and Resolution Directive (Directive 2014/59/EU) has been tabled and is waiting for its approval by the Parliament of Kosovo. The suggested draft provides, inter alia, for an establishment of a new, functionally independent department for banking recovery and resolution. Comprehensive improvements in this domain facilitated a sounder banking sector. This important progress notwithstanding, further reforms are necessary. The European Commission’s report on Kosovo of 2024 provides that in the coming year, the work needs to be continued to align with the latest versions of the Capital Requirements Regulation and the Capital Requirements Directive, and Bank Recovery Resolution Directive. These reforms will improve Kosovo’ preparedness in the area of financial services in the context of its accession process and further strengthen financial stability.

Kosovo is strongly committed to enhance its regulatory framework and supervisory practices in line with EU standards in the banking sector and is engaging with the EBRD on this topic. The CBK requested EBRD to provide technical assistance to prepare the assessment of its framework, identify gaps requiring new regulations or reform aiming to approximate further Kosovo’s bank regulatory and supervisory framework to the EU’s and address any material gaps in the local regulatory framework identified during this assessment. The services of a qualified Consultant will be engaged to provide the required assistance under the leadership of EBRD.

TC Services

The objective of this project is to support the Central Bank of Kosovo (CBK) in its efforts to align their regulatory and supervisory frameworks applicable to banks with EU standards by addressing the remaining disparities/identified gaps through technical assistance. The legal and regulatory work is expected to strengthen the financial stability by improving the quality of banking supervision and regulation in Kosovo. It is also expected to facilitate cross-border activity of financial market players in a sound prudential environment, as the country will adhere to and adopt the same high standards of prudential rules that are in force within the EU. The project will ultimately create an enabling environment to scale up operations of EU banks in Kosovo over time.

In order to fulfil the objective outlined above, the Consultant will be required to carry out the below deliverables:

1. Complete the self-assessment of Kosovo’s regulatory and supervisory framework for banks in line with the European Banking Authority (EBA) methodology.

2. Draft recommendations addressing the identified gaps in Kosovo’s regulatory and supervisory framework for banks relative to the EU standards.

3. Draft possible additional regulations and supervisory procedures or revisions to existing regulations and supervisory procedures, subject to the outcome of the self-assessment of Kosovo’s regulatory framework and supervisory practices with EU prudential standards in the banking sector and the gaps identified therein.

4. In case EBA equivalence assessment is scheduled, undertake due diligence and the completion of EBA equivalence questionnaires.

Understanding Transition

Further information regarding the EBRD’s approach to measuring transition impact is available here.

Enquiries

Business opportunities

For business opportunities or procurement, contact the client company.

For business opportunities with EBRD (not related to procurement) contact:

Tel: +44 20 7338 7168
Email: projectenquiries@ebrd.com

For state-sector projects, visit EBRD Procurement:

Tel: +44 20 7338 6794
Email: procurement@ebrd.com

General enquiries

Specific enquiries can be made using the EBRD Enquiries form.

TCRS 20615

Status Approved

Location

Kosovo

Business Sector

Financial Institutions

Notice Type

Public

PSD Disclosed

19 Dec 2024

Project Description

Rationale

TC Services

In order to fulfil the objective outlined above, the Consultant will be required to carry out the below deliverables:

1. Complete the self-assessment of Kosovo’s regulatory and supervisory framework for banks in line with the European Banking Authority (EBA) methodology.

2. Draft recommendations addressing the identified gaps in Kosovo’s regulatory and supervisory framework for banks relative to the EU standards.

4. In case EBA equivalence assessment is scheduled, undertake due diligence and the completion of EBA equivalence questionnaires.

Understanding Transition

Further information regarding the EBRD’s approach to measuring transition impact is available here.

Business opportunities

For business opportunities or procurement, contact the client company.

For business opportunities with EBRD (not related to procurement) contact:

Tel: +44 20 7338 7168
Email: projectenquiries@ebrd.com

For state-sector projects, visit EBRD Procurement:

Tel: +44 20 7338 6794
Email: procurement@ebrd.com

Any competitive selections for business opportunities relating to this project will be published on the EBRD's website: Consultancy Procurement Opportunities.

General enquiries

EBRD project enquiries not related to procurement:
Tel: +44 20 7338 7168
Email: projectenquiries@ebrd.com

Access to Information Policy (AIP)

The AIP sets out how the EBRD discloses information and consults with its stakeholders so as to promote better awareness and understanding of its strategies, policies and operations following its entry into force on 1 January 2020. Please visit the Access to Information Policy page to find out what information is available from the EBRD website.

Specific requests for information can be made using the EBRD Enquiries form

Independent Project Accountability Mechanism (IPAM)

If efforts to address environmental, social or public disclosure concerns with the Client or the Bank are unsuccessful (e.g. through the Client’s Project-level grievance mechanism or through direct engagement with Bank management), individuals and organisations may seek to address their concerns through the EBRD’s Independent Project Accountability Mechanism (IPAM).

IPAM independently reviews Project issues that are believed to have caused (or to be likely to cause) harm. The purpose of the Mechanism is: to support dialogue between Project stakeholders to resolve environmental, social and public disclosure issues; to determine whether the Bank has complied with its Environmental and Social Policy or Project-specific provisions of its Access to Information Policy; and where applicable, to address any existing non-compliance with these policies, while preventing future non-compliance by the Bank.

Please visit the Independent Project Accountability Mechanism webpage to find out more about IPAM and its mandate; how to submit a Request for review; or contact IPAM via email ipam@ebrd.com to get guidance and more information on IPAM and how to submit a request.

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Support for the alignment of CBK’s regulatory framework and supervisory practices with EU prudential standards in the banking sector

Project Description

Understanding Transition

Enquiries

Business opportunities

General enquiries

Project Description

Understanding Transition

Business opportunities

General enquiries

Access to Information Policy (AIP)

Independent Project Accountability Mechanism (IPAM)