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The Impact of Foreign Banks Presence on the Performance of Domestic Banks in Kosovo during the Period 2001-2007


  • Driton Balaj

    () (University of Prishtina, Prishtina, Kosovo)


The purpose of this study is to empirically research the impacts of the foreign bank’s presence on the performance of domestic banking sector in Kosovo. The research data on foreign and domestic banking are quarterly time seri data gathered by the Central Bank for the period 2001-2007. By using the compatible data on seven commercial banks, we introduce how the net interest margin, non interest margin, overhead cost, tax paid, and profitability differ between the foreign and domestic banks. We find that the foreign banks have higher net interest margin and profit than the domestic banks. The research outcome indicates that the presence of foreign banks had a negative and statistically significant impact on the net interest margin and loan loss provision of domestic banks, but positively related to the non-interest income, overhead cost and profitability of domestic banks, but we did not find any statistically significant values. The general conclusion is that the presence of foreign banks has not influenced on the increase of competitiveness.

Suggested Citation

  • Driton Balaj, 2010. "The Impact of Foreign Banks Presence on the Performance of Domestic Banks in Kosovo during the Period 2001-2007," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 4(4), pages 87-103, December.
  • Handle: RePEc:dug:actaec:y:2010:i:4:p:87-103

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    References listed on IDEAS

    1. Hermes, Niels & Lensink, Robert, 2001. "The impact of foreign bank entry on domestic banking markets: a note," Research Report 01E62, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    2. repec:dgr:rugsom:01e62 is not listed on IDEAS
    3. Janek Uiboupin, 2004. "Effects Of Foreign Banks Entry On Bank Performance In The Cee Countries," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 33, Faculty of Economics and Business Administration, University of Tartu (Estonia).
    4. Lensink, Robert & Hermes, Niels, 2004. "The short-term effects of foreign bank entry on domestic bank behaviour: Does economic development matter?," Journal of Banking & Finance, Elsevier, vol. 28(3), pages 553-568, March.
    5. Niels Hermes & Robert Lensink, 2004. "Foreign Bank Presence, Domestic Bank Performance and Financial Development," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 3(2), pages 207-229, August.
    6. Claessens, Stijn & Demirguc-Kunt, Asl[iota] & Huizinga, Harry, 2001. "How does foreign entry affect domestic banking markets?," Journal of Banking & Finance, Elsevier, vol. 25(5), pages 891-911, May.
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    foreign banks; domestic banks; performance;


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