Acta Universitatis Danubius. Œconomica, Vol 6, No 4 (2010)

Abstract

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.