Credit risk management and nonperforming loans in commercial banks in Kosovo

• Author: Petrit Hasanaj - Besmir Ahmetaj
• Position: University of Prizren - Pro Consulting-Group
• Pages: 92-102

Vo

l.

5

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o

. 1

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arc

h,

201

9

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cademic Journal o

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Business,

A

dministration, Law and Social Science

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II

PCCL Publishin

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, Graz-

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ustri

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SSN 2410-391

8

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cces online at www.ii

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ccl.or

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92

Credit risk mana

g

ement and nonperformin

g

loans in commercial banks in

K

oso

v

o

Petr

i

t Hasana

j

University of Prizren

Besmir A

h

meta

j

Pro Consulting-Group

Ab

str

a

c

t

The main purpose of this research is to analyze the credit risk and the level of nonperforming

l

oans o

f

commercial banks in Kosovo. Risk is an internal element o

f

banking activity, but

e

xcessive risk and poor management can lead to losses, endangering the security o

f

a bank.

G

iven that banks play an important f‌i nancial role, they must operate safely and soundly and

have su cient capital and reserves to cope with the risks they undertake in the course of their

activity. Credit risk is the main risk faced by the banking system. Banks in our country still

have high interest rates on loans, but nonper

f

orming loans are lower than in the countries o

f

t

he region and beyond. This study used the tools, techniques and methods needed to analyze

t

he credit risk and the level of nonperforming loans of the banking system in Kosovo, as well

as to analyze the behavior of the consumer against the interest rate on loans of commercial

b

anks in Kosovo. Structural (questionnaire) data are also used, as this method is more e cient

and helps in collecting credible data and

f

acilitates the achievement o

f

the objectives o

f

this

study.

K

e

y

words: Credit risk, risk mana

g

ement, loans, interest rates, risk indicators.

I

ntr

oduc

t

io

n

E

conomic theor

y

recognizes di



erent de

f‌i

nitions

f

or risk, de

p

ending on the situation,

view

p

oint an

d

o

b

jectives. T

h

e ris

k

h

as to

d

o wit

h

uncertaint

y

, wit

h

t

h

e

p

ossi

b

i

l

it

y

to

l

ose, but also to win, or sim

p

l

y

deviate

f

rom the ex

p

ected outcome

.

F

or a risk business, it is

p

ossible to occur events that cause

f‌l

uctuations and non

-

f

ul

f‌i

llment o

f

objectives.

I

n toda

y

's business the risk

p

la

y

s a critical role.

A

lmost

e

ver

y

b

usiness

d

ecision re

q

uires managers an

d

executives to

b

a

l

ance ris

k

an

d

return.

E

ective business risk management is essential to the com

p

an

y

's success.

I

n the

b

an

k

ing s

y

stem, ris

k

management ta

k

es on

p

articu

l

ar im

p

ortance, w

h

ere regu

l

ators

are res

p

onsible

f

or

p

rotection against

f

ailures o

f

the banking s

y

stem and the econom

y

.

A

lthough banks have man

y

similar risks to other businesses, the main risks that

b

an

k

s

h

ave

p

articu

l

ar im

p

act on an

d

w

h

ic

h

are

d

ea

l

t wit

h

in t

h

is researc

h

are: Cre

d

it

r

isk, o

p

erational risk, li

q

uidit

y

risk.

B

anks need to manage their risks care

f

ull

y

, as ine



ective risk management can

q

uickl

y

lead to bank

f

ailure.

If

a bank is

p

erceived to be in a weak

f‌i

nancial

p

osition,

de

p

ositors will withdraw their

f

unds, other banks will not credit, on the other hand

t

h

e

b

a

nk

i

ts

e

l

f

w

i

ll n

o

t b

e

a

bl

e

t

o

s

e

ll d

e

bt s

e

c

u

r

i

t

ie

s

i

n th

e

f‌i

n

a

nc

ia

l m

a

rk

e

ts.

A

ll

of

this would

f

urther aggravate its

f‌i

nancial situation. This

p

a

p

er is enriched with