Determinants of credit risk in commercial banks of Kosovo

Purpose: The purpose of this paper is to analyze some of the determinants of credit risk in commercial banks in Kosovo through the use of regression analysis for a dataset covering a time series of 7 years (2012 - 2018). Design/Methodology/Approach: The data have been collected from publications of Central Bank of Kosovo and from Kosovo Agency of Statistics The data have been analyzed on quarterly basis. In order to conduct the empirical part of the study that gives us the answer to the relationship between credit risk and the determinants of this risk, we analyzed 6 variables in the study. To perform the necessary analysis we have used the statistical software SPSS 23. Through the regression analysis, the main findings and results of the study were generated. Findings: After analyzing the necessary data, the paper concludes that, among credit risk determinants, interest rates on loans and profitability of banks (ROA) have the largest and most significant impact on credit risk, namely non-performing loans as the credit risk measure. Practical implications: For researchers and academics, the study provides a useful basis on which further studies on credit risk and the factors that cause this risk can be conducted. Originality/Value: The research paper is based on recent studies that assess credit risk in other countries and use reliable data on the banking sector in Kosovo.peer-reviewe

FACTORS THAT DETERMINE THE PROFITABILITY OF COMMERCIAL BANKS IN KOSOVO

The main role of any financial system is to help transfer funds from savers to borrowers by increasing consumption and investment in the economy. If a financial system is efficient, then it should show improvements in profit, increasing the volume of flow of funds into the economy and providing quality customers service. Unlike developed countries, where this flow of funds is enabled by financial markets, in developing countries where we are part, the functioning of these markets is often lacking. Due to the lack of markets, all the weight of this falls in the banking sector, which sector plays an important role in the intermediary economy and this indicates the importance of studying the profitability of this sector, which profitability depends on many factors. The paper aims to analyze the profitability sensitivity of the banking sector in Kosovo to some of the factors that we have treated in the paper as internal and external or macroeconomic factors. To carry out this analysis, the paper uses a regression analysis for a time series covering a period of 7 years (2012 - 2018), using the data from commercial banks in Kosovo and some macroeconomic indicators. The result shows that the ratio of non-performing loans is negatively related to the profitability of commercial banks in Kosovo measured by ROA and ROE and is considered to be the most influential factor on the profitability of these banks, among other factors studied