The Law No. 08/L-304 on Banks introduces a significant reform of the regulatory framework governing Kosovo’s banking sector.
The Law was published in the Official Gazette on 27 January 2026 and entered into force 15 days after publication. It partially repeals Law No. 04/L-093 on Banks, Microfinance Institutions and Non-Bank Financial Institutions and establishes a broader framework for the licensing, governance, prudential supervision, recovery and resolution of banks.
Banks already licensed to operate are, in principle, given a 12-month period to adapt to the new requirements, while specific requirements may be subject to different timelines.
What are the key changes?
1. Higher capital requirements
The Law requires each bank to maintain minimum paid-in capital of €10 million, or a higher amount if determined by the CBK.
Beyond the minimum paid-in capital requirement, the Law strengthens the regulatory capital framework and the requirements for banks to maintain capital appropriate to their risk profile.
2. A more structured framework for capital adequacy and risk management
The Law requires banks to maintain sound and comprehensive strategies and procedures for assessing and maintaining the level, type and distribution of their internal capital.
It also establishes the Leverage Ratio as a separate prudential requirement.
In practice, this places greater importance on internal processes for assessing capital adequacy, managing risk, reporting, and integrating these processes with the bank’s financial planning.
3. A more comprehensive framework for Recovery and Resolution
The Law introduces a detailed framework for the recovery and resolution of banks.
Banks must prepare and maintain recovery plans setting out measures that may be taken to restore their financial position in the event of significant financial deterioration.
The Law also provides for resolution plans and requires the CBK to assess whether a bank can be resolved in an orderly manner while, to the extent possible, avoiding significant adverse effects on the financial system and ensuring the continuity of critical functions.
Resolution does not simply mean closing or liquidating a bank. The Law establishes a specific resolution regime and provides for various resolution tools that may be used where the relevant legal conditions are met.
The CBK may take resolution action where the statutory conditions are satisfied, including where a bank is failing or is likely to fail, no alternative measure would prevent the failure within a reasonable timeframe, and resolution action is necessary in the public interest.
4. Clearer requirements for bank governance
The Law strengthens requirements concerning the structure and functioning of banks’ governing bodies.
The Board of Directors must consist of at least five voting members, in an odd number, and include at least two independent directors, at least one of whom must be a resident and citizen of Kosovo.
The Law also establishes requirements concerning the suitability, independence and conflicts of interest of directors and senior management, as well as the CBK’s role in approving certain appointments.
Banks must also maintain appropriate internal audit, risk management and compliance functions, with clear separation of responsibilities.
5. More detailed outsourcing requirements
The Law establishes a specific framework for outsourcing.
Banks must ensure that the delegation of functions or activities to third parties does not undermine effective management, internal controls, or the CBK’s ability to exercise supervision.
Specific requirements apply to critical functions or operations and, in cases provided by law and regulation, prior CBK authorisation is required.
Importantly, outsourcing does not transfer the bank’s regulatory responsibility. The bank remains responsible for compliance with regulatory requirements even where a function is performed by an external service provider.
6. Clearer responsibilities and sanctions
The Law establishes a more detailed framework for administrative measures and sanctions.
For certain violations, banks may face significant fines, while individual fines may also apply to senior management or Board members for specified violations.
The CBK also has powers to take measures against directors and senior managers in circumstances defined by law.
This makes clear allocation of responsibilities, documented decision-making and effective internal controls increasingly important.
What does this mean for banks in practice?
Implementation of the new Law should not be treated simply as a matter of updating internal policies.
It will, in many cases, require a more substantive review of governance arrangements, risk management frameworks, internal controls and documentation practices.
Banks should consider reviewing:
- structure and functioning of the Board of Directors;
- status and independence of directors;
- internal audit, risk and compliance functions;
- risk management and capital adequacy processes;
- recovery plans and resolution preparedness;
- existing outsourcing arrangements;
- authorisation and reporting processes with the CBK;
- policies on conflicts of interest and related-party transactions;
- internal accountability and control frameworks.
Effective implementation will also require coordination between Legal, Compliance, Risk, Finance and Business functions.
The new requirements are interconnected and cannot be addressed effectively by a single function operating in isolation.
From Formal Compliance to Practical Implementation
The new Banking Law moves the regulatory framework further towards an integrated approach to governance, capital, risk management, recovery and resolution.
For banks operating in Kosovo, the adaptation period provides an opportunity to assess whether existing structures, policies, contracts and processes are aligned with the new legal and regulatory requirements.
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