DETERMINANTS OF BANK’S NET INTEREST MARGINS IN KOSOVO

The aim of this paper is to investigate internal and external determinants that impact the Net Interest Margin (NIM). The paper employs an OLS-PSCE procedure using quarterly Panel Data (From March 2013 to December 2019) for commercial banks in Kosovo. Results suggest that the Net Interest Margin in the banking sector in Kosovo is mostly influenced by factors within the bank such as: Loan-to-Deposit Ratio; Operation Costs and Fee Income, but less affected by external factors besides inflation. In addition, results suggest that external factors do not influence the net interest margin; therefore, a governmental policy intervention might not have an impact on Net Interest Margin. The results of the research are important for commercial banks in Kosovo, since they can help improve the efficiency through the internal and external indicators that are impacting the NIM.