RISK MANAGEMENT IN BANKING SECTOR: EMPIRICAL DATA FROM COMMERCIAL BANKS IN KOSOVO

Financial institutions are an important source of financial system functioning of a country and include banks, pension funds, insurance companies, microfinance institutions, and so on. While the risk of financial institutions presents their ability to lose, consequently the change of the actual cash flow from the planned one. Among the major risks facing financial institutions are credit risk, market risk, operational risk and liquidity risk. The purpose of this paper is to investigate the risk management in financial institutions by making a survey with the banking sector, which accounts for most of the financial activities. For this reason, eight financial indicators are used to calculate the financial performance of the eight commercial banks involved in the research, which operate in Kosovo, taking into account the last two years of their operation. From the data derived from these indicators, using the One-Way ANOVA analysis, differences between banks were investigated according to their performance. As a result, it has been found that there are significant differences between banks according to liquidity risk, credit risk, equity risk and profitability risk. In addition, a linear regression model was also performed, which shows that the change in the return on equity (ROE) depends almost entirely on the change in the other seven indicators included