This Financial Sector Stability Review (FSSR) Follow up for Kosovo assesses progress since the 2019 FSSR and identifies remaining vulnerabilities and capacity gaps in financial sector oversight and macroprudential policy. Kosovo’s financial system remains broadly sound and resilient, supported by strong bank capitalization, low non performing loans, and sustained economic growth. However, rapid credit expansion, exposure to external shocks, high banking sector concentration, and limited crisis management capacity pose risks requiring monitoring. The review finds that the Central Bank of Kosovo (CBK) has made important advances in strengthening risk based bank supervision, implementing elements of Basel III, and activating macroprudential capital buffers. At the same time, supervisory capacity constraints, remaining data gaps, and incomplete macroprudential and resolution frameworks need to be addressed to support the authorities’ ability to identify, prevent, and manage systemic risks effectively. The report proposes a prioritized technical assistance roadmap focused on reinforcing banking supervision, completing the transition to a Supervisory Review Process, strengthening macroprudential governance and analytical capacity, improving systemic risk monitoring, especially in real estate and household credit, and enhancing crisis preparedness. These reforms are central to safeguarding financial stability as Kosovo’s financial system continues to deepen and integrate regionally.
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