Loans make up the bulk of a bank’s assets, and thus credit risk is the most significant risk for commercial banks in Kosovo and throughout the world. Despite its complexity, effective management of credit risk is a prerequisite for the success of a bank and the banking system in general. A special role in this aspect is played by the separation of reserves to cover the risk of failure to repay the loan or in cases of non-fulfilment of contractual obligations by the loan recipient. Therefore, this research aims to address this issue and analyses the credit risk management of the banking system of the Republic of Kosovo in general and the effects of separation of reserves for loan losses in particular
