Does Credit Risk Management affect the Financial Performance of Commercial Banks in Kosovo?

  • Rrustem Asllanaj University of Pristina
Keywords: Commercial Banks, Credit Risk, Financial Performance, Management


This study analyses the impact of credit risk management on financial performance of commercial banks in Kosovo, and comparing the relationship between the determinants of credit risk management and financial performance by using CAMEL indicators. Panel data of 85 observations from 2008 to 2012 of ten commercial banks was analysed using multiple regression model. Findings through multiple regression analysis are presented in forms of tables and regression equations. The study also elaborates whether capital adequacy, asset quality, management efficiency, earnings and liquidity have strong or weak relationship with financial performance of commercial banks. The study concludes that CAMEL model can be used as a system of assessment and rating of credit risk management by commercial banks in Kosovo.


Altman, E., Caouette, J. and Narayanan, P. (1998): Credit-risk Measurement and Management: the ironic challenge in the next decade. Financial Analysts Journal, 54(1), 7-11.

Basel Committee on Banking Supervision. (2001): Risk Management Practices and Regulatory Capital: Cross Sectional Comparison. Retrieved from:

Basel Committee on Banking Supervision. (1999): Principles for the Management of Banking. 5-27. Retrieved from:

Bessis, J. (1998). Risk Management in Banking, New York, John Wiley and Sons.

Central Bank of The Republic of Kosovo. (2012): The annual report on the performance of the banking sector in Kosovo, Prishtina, 43-67.

Ellul, A., and Yerramilli, V. (2010): Stronger Risk Controls, Lower Risk: Evidence from U.S. Bank Holding Companies. Indiana University.

Ennis, H. M, and Malek, H. S. (2005): Bank risk of failure and the too-big-to-fail policy. Economic Quarterly, 91(2), 21-44.

Epure, M, and Lafuente, I. (2013): Monitoring Bank Performance in the Presence of Risk”, Working Paper Series, 61.

Godlewski, C. (2005): Banks’ Default Risk and Regulatory Factors in Emerging Market Economies, Journal of Financial Transformation, 15, 147-158.

Hefferman, S. (1996): Modern Banking in Theory and Practice, John Wiley and Sons Ltd, England.

Hunter, W. C., and Smith, S. D. (2002). Risk Management in the Global Economy: A Review Essay, Journal of Banking and Finance, 26, 205-221.

Hoti, A., & Nuhiu, A. (2011): Early adoption of International Financial Reporting Standards (IFRS) in the US capital markets, International Research Journal of Finance and Economics, No. 81, 98-105.

Kalapodas, E. and Thomson, M. E. (2005): Credit risk assessment: a challenge for financial institutions. IMA Journal of Mathematics, 35-55.

Kithinji, A. M. (2010): Credit Risk Management and Profitability of Commercial Banks in Kenya, School of Business, University of Nairobi, Nairobi.

Kunt, A. and Detragiach, E. (2010): Basel Core Principles and Bank Risk: Does Compliance Matter? IMF Working Paper, WP/10/81.

Nuhiu, A., & Hoti, A. (2011): Effects of capital markets development on economic growth of Western Balkan countries. European Journal of Economics, Finance and Administrative Sciences, 43, 88-96.

Nuhiu, A., Hoti, A., & Bektashi, M. (2017): Determinants of commercial banks profitability through analysis of financial performance indicators: evidence from Kosovo. Business: Theory and Practice, 18, 160.

Quagliariello, M. (2007): Banks’ Riskiness over the Business Cycle: A Panel Analysis on Italian Intermediaries. Applied Financial Economics, Taylor and Francis Journals, 17(2), 119-138.

Saunders, A. and Cornet, M. (2008): Financial Institutions Management. A Risk Management Approach, McGraw-Hill Irwin, 6th edition.

How to Cite
Asllanaj, R. (2018). Does Credit Risk Management affect the Financial Performance of Commercial Banks in Kosovo?. International Journal of Finance & Banking Studies (2147-4486), 7(2), 49-57.