European Commission recognises progress in financial sector reforms and confirms the soundness of Kosovo’s banking sector

The Central Bank of the Republic of Kosovo (CBK) welcomes the European Commission's assessments in the Kosovo 2026 Report, which confirms the soundness and resilience of the banking sector and recognises the progress achieved in advancing legal, regulatory and institutional reforms in the financial sector, in line with European Union (EU) standards and practices.

The Report acknowledges good progress in the area of free movement of capital (Chapter 4), highlighting the adoption of legislation on payment services and on the prevention of money laundering and terrorist financing. The incorporation of Open Banking provisions in the Law on Payment Services, has been highlighted as positive progress in the digitalisation of financial services. The European Commission notes that the recommendations from the previous year have been largely implemented in this area, recognising the progress made in aligning the legal framework with EU requirements.

In the area of financial services (Chapter 9), the Report highlights progress in aligning banking legislation with European standards, particularly regarding capital requirements and bank recovery and resolution. In this context, it acknowledges developments in the legal and institutional framework, including the designation of the CBK as the bank resolution authority and steps towards operationalising this function.

The European Commission confirms that Kosovo's banking sector has continued to expand while remaining sound and resilient, supported by satisfactory indicators of capitalisation, asset quality and financial performance. According to the data presented in the Report, as of the end of June 2026, the capital adequacy ratio stood at 17.1%, while the non-performing loan ratio was 2.0%, demonstrating the resilience of the banking sector and its capacity to support economic activity.

The Report also recognises progress in implementing the roadmap for the Supervisory Review and Evaluation Process (SREP), as part of the transition towards fully risk-based supervision by the end of 2027. This development reflects the CBK's commitment to advancing supervisory practices and further strengthening the resilience of the financial system.

In the area of payment systems, the European Commission acknowledges progress achieved through the adoption of the Law on Payment Services, which advances alignment with the relevant EU directives and regulations. This reform provides an important foundation for developing modern payment services, fostering competition and innovation, and advancing Kosovo's financial integration into the European market, including preparations for applying to the Single Euro Payments Area (SEPA) and developing infrastructure for fast payments.

Under economic and monetary policy (Chapter 17), the Report acknowledges the CBK's continued efforts to strengthen institutional governance and transparency, contributing to the further development of its institutional framework.

The Governor of the CBK, Mr. Ahmet Ismaili, emphasised that the European Commission's assessments represent important recognition of the progress achieved through the reforms undertaken and the institution's commitment to safeguarding financial stability and aligning with European standards.

"The European Commission's assessments confirm the resilience of the banking sector and recognise the progress of the reforms we are implementing within the CBK's mandate. Advancing risk-based supervision, modernising the legal and regulatory framework, developing payment systems, and strengthening institutional capacities remain key priorities of our work. We are committed to continuing the implementation of reforms and addressing the European Commission's recommendations, while safeguarding institutional independence and contributing to Kosovo's financial and economic integration into the European Union," Governor Ismaili stated.

The CBK remains committed to implementing its Strategic Plan, further strengthening financial supervision and stability, advancing the bank recovery and resolution framework, developing the insurance sector, modernising payment systems, and enhancing institutional governance.

In this regard, the CBK will continue its cooperation with domestic institutions, the European Commission and international partners to address the Report's recommendations and advance reforms that support the sustainable development of the financial sector and Kosovo's European integration.

Full European Commission Kosovo 2026 Report: https://enlargement.ec.europa.eu/document/download/fbf2d883-1d14-4e09-8aba-c904ba0d5d9b_en?filename=kosovo-report-2026.pdf