1

Republika e Kosovës
Republika Kosovo – Republic of Kosovo
Kuvendi – Skupština – Assembly
_______________________________________________________________________
Law No. 04/L-093

ON BANKS, MICROFINANCE INSTITUTIONS AND NON BANK
FINANCIAL INSTITUTIONS

Assembly of Republic of Kosovo,

Based on Article 65 (1) of the Constitution of the Republic of Kosovo;

Approves:

LAW ON BANKS, MICROFINANCE INSTITUTIONS AND NON
BANK FINANCIAL INSTITUTIONS

CHAPTER ONE
BANKS AND BANKING

PART 1
GENERAL PROVISIONS

Article 1
Purpose

The purpose of this Law is to foster and maintain a stable financial system through
promoting the sound and prudent management of banks, microfinance institutions and
other non bank financial institutions and providing an appropriate level of protection for
depositors’ interests.

2 Article 2
Scope

This Law shall apply to all entities exercising banking and financial activities, their
shareholders, Board of Directors and Senior Managers, employees, agents and affiliates
as well as to the operation of microfinance institutions and other non bank financial
institutions.

Article 3
Definitions

Terms used in this Law shall have the following meanings:

Affiliate – a subsidiary of a bank, a legal entity of which such bank is a subsidiary or a
legal entity that is under common control with such bank;

Bank- a shareholder company engaged in the business of banking, including a subsidiary
or a branch of a foreign bank;

Bank- Related Person – any person that maintains with the bank at least one of the
following relationships:

(1) any Senior Manager or Director of the bank and any principal shareholder of the
bank;

(2) any person who is related to a Senior Manager or Director or principal
shareholder of the bank by marriage or consanguinity to the second degree;

(3) any legal entity in which a Senior Manager or Director or principal shareholder of
the bank is also a principal shareholder;

(4) any person that has a significant interest in a legal entity in which the bank has a
significant interest;

(5) any affiliate of the bank; and

(6) any other person involved in a relationship with the bank similar to those
identified in sub-paragraphs 1-5 above, that the CBK determines by regulation or
order to be a bank-related person;

Banking group – a bank and its affiliates and any other entities that the CBK determines
by regulation or order should be taken into account for purposes of consolidated
supervision;

3 Branch office – a place of business which forms a legally dependent arm of a bank that is
not separately incorporated, through which a bank may be permitted to engage in the
business of banking;

Business of Banking – the business of accepting deposits from the public and employing
such funds either in whole or in part for the purpose of granting credit or making
investments at the bank’s own risk;

Capital distribution – a distribution of cash or other properties by a bank to its owners
made on account of that ownership, but not including any dividend consisting only of
shares of the institution or rights to purchase such shares;

Control – a relationship where a person or group of persons, directly or indirectly: (i)
owns a majority of the shares of a legal entity; (ii) has the power to appoint or remove the
majority of the Board of Directors of the legal entity; or (iii) has the ability to exert a
significant influence on the management or policies of a legal entity;

CBK – the Central Bank of the Republic of Kosovo;

Deposit – a sum of money paid by a person or legal entity to a Bank, which is accepted
by that Bank on condition that it is to be repaid in full , with or without interest or
premium either on demand or at an agreed time to that person or legal entity;

Director – any person appointed by the shareholders to serve as a member of a bank’s
Board of Directors;

Equity interest – any ownership right with respect to a legal entity;

Exposure – any asset or off-balance sheet item, including without limitation a loan or
direct or indirect commitment to disburse money in exchange for a right to repayment of
the amount disbursed and outstanding and to the payment of interest or other charges on
such amount, any deferment of the due date of a debt, any guarantee or letter of credit
issued, debt securities, and similar forms of credits or credit commitments granted by a
bank to a client, as well as shares, participation in the capital, and other types of
investments in a legal entity by a bank;

Financial Institutions – all banks, Non Bank Financial Institutions and Microfinance
Institutions regulated under this Law;

Non Bank Financial Institution (NBFI) – a legal entity that is not a bank and not a
microfinance institution that is licensed by the CBK under this Law to be engaged in one
or more of the following activities: to extend credit, enter into loans and leases contracts
financial-leasing, underwrite, trade in or distribute securities; act as an investment
company, or as an investment advisor; or provide other financial services such as foreign
exchange and money changing; credit cards; factoring; or guarantees; or provide other
financial advisory, training or transactional services as determined by CBK

4 Financial activity – an activity identified in Article 44 of this Law;

Foreign bank – a person that is organized, has its head office and holds a license to
engage in the business of banking in a jurisdiction other than Kosovo;

Home country supervisor – the foreign supervisory authority responsible for the
prudential supervision of the foreign bank;

Islamic Bank – a type of bank, including an Islamic banking window that undertakes the
business of banking according to Shariah principles and subject to the provisions of this
Law and regulations promulgated by the CBK; “Islamic banking window” refers to a
department or division of a non-Islamic bank that provides financing services according
to principles of Shariah;

Large exposure – any exposure to a single person or group of connected persons that
exceeds the proportion of Tier 1 capital specified by the CBK under Article 46 of this
Law;

Legal Entity – a general term meaning any organization, including a business
organization that has, as a matter of law, a legal identity that is separate and distinct from
its members, owners, or shareholders;

License – an authorization issued by the CBK granting the right to engage in activities
specified by that authorization;

Microfinance Institution – a legal entity organized as either an NGO under the NGO
Law or as a joint stock company under the Law on Business Organizations which
provides as its primary business loans and a limited number of financial services to micro
and small legal entities, low-income households and low-income persons;

Order – a written directive issued by the CBK implementing this Law or a regulation
adopted by the CBK;

Paid-in capital – funds received by the bank from shareholders in exchange for their
equity interest;

Person – refers only to, a natural person;

Principal shareholder – a person that owns, directly or indirectly, alone or in concert
with another person, ten percent or more of any class of voting shares of a bank or
company or ten percent of the equity interest in a bank or company;

Regulation – a sub-legal act adopted by the CBK in implementation of this Law;

Regulatory capital – the total capital of the bank as prescribed by the CBK for the
purposes of Article 16 of this law;

5 Related Individuals – the spouse of a person, the children of a person, whether they are
adults or minors, and whether or not they reside with the person, mother, father, step-
parents, brothers, step-brothers, sisters, step-sisters, aunts, uncles, first cousins, whether
by blood or marriage, or other persons with whom there is familiar relationship, or other
persons as defined by the CBK with special regulation;

Representative office – a place of business that forms a legally dependent arm of a bank,
and that is not separately incorporated, where activities are limited to the provision of
information and liaison activities and studying markets and investment opportunities, and
where a bank is not permitted to engage in the business of banking;

Senior Manager – the chief executive officer, chief financial officer, chief operating
officer, and chief risk officer of a bank and any person, other than a director, who (i)
reports directly to the board or participates or has authority to participate in major
policymaking functions of the bank, whether or not such person has an official title or
receives compensation for such actions, and (ii) is designated as a senior manager by the
CBK. In the case of a foreign bank licensed to operate one or more branches in Kosovo,
the manager of the principal branch in Kosovo and any other manager or deputy manager
of a branch in Kosovo will be deemed to be a member of senior management;

Significant interest – a direct or indirect holding of an interest in a legal entity, alone or
in concert with another person, that represents five percent or more of its outstanding
voting shares, or, in the opinion of the CBK, based on the facts and circumstances of that
holding makes it possible for the holder to exercise control over the legal entity in which
such shares are held;

Subsidiary – any legal entity in which another person or group of persons acting in
concert holds directly or indirectly (i) the equivalent of fifty percent or more of any class
of voting shares or (ii) a significant interest that permits such person or group of persons
to exercise control over the legal entity in which such shares are held;

Tier 1 capital – have the meaning prescribed by the CBK in a separate regulation for the
purposes of Article 16 of this law;

Voting shares – common shares in the capital of the person and any other shares of any
designation or description that carry the right to vote on any resolution at a general or
extraordinary meeting of the issuer.

Article 4
Licensing Responsibility of the CBK

1. The CBK shall have sole responsibility for the issuance of licenses to all banks and
registration of all Microfinance Institutions and NBFIs and for the issuance of permits to
foreign banks with respect to the establishment of representative offices.

6 2. A central register shall be kept by the CBK for inspection by the public that shall
record for all Financial Institutions the name, the head office and branch office addresses,
and current copies of its charter or equivalent establishing documentation and by-laws. A
list of all Financial Institutions the licenses or registration of which have been revoked,
shall also be maintained in the register, but their chartering documentation and by-laws
shall be removed.

Article 5
Prohibitions and Exemptions

1. No person shall engage in the business of banking or conducting any financial activity
without an effective license issued by CBK under Part II of this law.

2. No person shall use the word “bank” or derivatives of the word “bank” in respect of a
business, product, or service or in promotional business without having a license issued
by the CBK to engage in the business of banking, unless such usage is established or
recognized by this Law, an international agreement or where the context in which the
word “bank” is used does not concern the conduct of any financial activity as set forth
under Article 44 of this Law. No representative office shall use the word “bank” in their
name, except in cases where the word “bank” forms an integral part of the name of the
foreign bank to which they belong, provided that, in such cases, the words “representative
office” shall be added.

3. No bank shall use words in its title that are misleading concerning its financial
condition, legal status or connection with government or international institutions.

4. No foreign bank shall be permitted to engage in the business of banking in Kosovo
unless the foreign bank has obtained a license issued by the CBK to conduct such activity
through a branch office in Kosovo or has established a subsidiary bank in Kosovo for
which a license has been issued by the CBK.

5. No person shall make a misstatement of material fact or a false or misleading
representation or do anything to create a false or misleading appearance or engage in any
manipulative device or practice in relation to taking deposits.

Article 6
Foreign Banks Licensed to Operate a Branch in Kosovo

In the case of a foreign bank that is licensed to operate in Kosovo through one or more
branches, the provisions of this Law apply to the foreign bank directly, except where the
provisions of this Law expressly provides for application solely to the branch or branches
of the foreign bank operating in Kosovo, individually or collectively, or where the CBK
determines that the context so requires.

7
PART II
LICENSING OF BANKS

Article 7
License Applications

1. Applications for a license to establish and operate a bank or a branch of a foreign bank
shall be in such form as prescribed by the CBK and shall be accompanied by the
following information:

1.1. the constituent documents of the proposed bank or the foreign bank,
including an original document or a notarized copy under which it was formed,
and the proposed address of the main office;

1.2. the name, nationality, place of residence, qualifications and experience of the
Director or Senior Manager of the proposed bank or the foreign bank, including
business and professional history for the past ten (10) years;

1.3. the amount of the authorized and subscribed capital of the proposed bank or
the foreign bank, including the amounts that have been paid in and the legal
source of the capital;

1.4. a business plan setting out, inter alia, the organizational structure of the
proposed bank or the foreign bank, the types of banking activities envisaged,
projected financial statements for three years and, if applicable, audited financial
statements and annual reports for the past two (2) years;

1.5. a list of shareholders that hold or would hold five (5%) percent or more of the
proposed bank or the foreign bank’s shares, and the ultimate beneficial owners of
those shares, stating their name, address and respective shareholdings;

1.6. the name, nationality, place of residence, business and professional history
for the past ten (10) years, and audited financial statements for the past three (3)
years (if applicable), of each principal shareholder of the proposed bank or the
foreign bank;

1.7. for each Director or Senior Manager or principal shareholder of the proposed
bank or the foreign bank, an official statement from the Court disclosing any
convictions for offenses by a criminal Court, personal bankruptcy filings,
disqualifications from practicing a profession, or past or present involvement in a
managerial function of a body corporate or other undertaking subject to
insolvency proceedings, if any;

1.8. in any case where the applicant is a foreign bank proposing to establish a
subsidiary bank or branch office in Kosovo, a statement from the home country

8 supervisor that it has no objection to the proposed establishment of operations in
Kosovo, and exercises global consolidated banking supervision over the foreign
bank;

1.9. such additional information as the CBK reasonably deems appropriate.

Article 8
Preliminary Approval

1. Within three (3) months from the date of its receipt of a complete application for a
license, the CBK shall preliminarily approve or deny it, and notify the applicant of its
decision in writing; notifications of the denial of a license shall state the grounds on
which the license was denied.

2. The CBK shall deny a license if, in its reasonable judgment, issuing such license
would:

2.1. jeopardize the financial soundness of the proposed bank or the banking
system more generally;

2.2. endanger the interests of the proposed bank’s depositors; or

2.3. substantially lessen competition.

3. The CBK shall preliminarily approve a license only if it is satisfied that:

3.1. the business plan is based on sound analysis under reasonable assumptions;

3.2. the organizational structure of the proposed bank and its affiliates will permit
CBK to effectively exercise supervision on a consolidated basis;

3.3. the proposed bank or the foreign bank will comply with all provisions of this
Law;

3.4. the qualifications, experience and integrity of its Director or Senior Manager
are appropriate for the proposed bank’s business plan and banking activities;

3.5. the principal shareholders of the proposed bank or the foreign bank are fit and
proper as determined by the CBK under Article 35 and 37 of this Law; and

3.6. the ownership structure of the bank will not hinder effective supervision.

9 4. In addition to the conditions set forth in paragraph 3. of this Article, preliminary
approval of licenses concerning a subsidiary or branch office of a foreign bank shall be
granted only if:

4.1. the foreign bank is authorized to engage in the business of receiving deposits
or deposit-like funds in the jurisdiction where its head office is located;

4.2. the competent authorities that supervise the foreign bank at its headquarters
have given their written consent to the granting of such license; and

4.3. the CBK determines that the foreign bank is adequately supervised on a
global consolidated basis by its home country supervisor. The Home Country
Supervisor must acknowledge in writing that is aware of the granting of a new
license and agrees to provide information to the CBK upon request.

5. In the case of preliminary approval of an application for a license, the CBK shall
enumerate any conditions for the bank to receive the license and to commence its
operations. Such conditions may include:

5.1. the payment by shareholders to the bank of its minimum paid-in capital;

5.2. the hiring and training of the staff of the bank;

5.3. the lease or purchase of operations equipment and the establishment of
operations systems, including internal audit and controls;

5.4. the lease, purchase or occupancy of bank premises;

5.5. the engagement of an external auditor in accordance with Article 54 of this
law; and

5.6. any other condition that the CBK deems appropriate.

6. If a bank fails to comply within one (1) year with the conditions to receive the license
to commence operations, the preliminary approval of the application shall be revoked.

Article 9
Issuance of a License

1. If the CBK determines that the conditions in this Chapter have been satisfied, it shall
issue a license and the bank shall become member of Fund for Ensuring the Kosovo
Deposits.

10 2. A license shall be granted in writing for an indefinite period of time and shall not be
transferable. The license or permit shall specify the terms and conditions under which it
has been issued, including the activities in which the bank is permitted to engage, subject
to the restrictions on bank activities set forth in Article 45 of this Law. Subsequent to
initial licensing, banks properly entitled may apply to the CBK to engage in additional
activities in accordance with Article 44 of this Law.

Article 10
Representative Offices Permits

1. No foreign bank may establish or operate a representative office in Kosovo without a
permit from the CBK.

2. The CBK may grant a permit for a representative office in Kosovo, provided that the
CBK is satisfied that the foreign bank will limit the activities of the representative office
to the provision of information and liaison activities and studying markets and investment
opportunities, and that the foreign bank will not engage in the business of banking in
Kosovo through the representative office.

3. Applications by a foreign bank for a permit to establish and operate a representative
office shall be in such form as prescribed by the CBK and shall be accompanied by such
information as the CBK shall require.

Article 11
Additional Branches and Offices

1. A bank shall obtain prior written approval of the CBK before closing or relocating a
branch or office in Kosovo or establishing or acquiring an additional branch or office in
Kosovo.

2. A bank other than a foreign bank shall obtain prior written approval of the CBK before
establishing or acquiring a branch or a subsidiary in another jurisdiction.

3. The CBK shall prescribe by regulation the procedure for obtaining prior written
approval and the form and content of the application.

Article 12
Requirement to Form Subsidiary

1. The CBK may require a foreign bank that is licensed to operate one or more branches
in Kosovo to convert the branch to a subsidiary of the foreign bank if:

11 1.1. there is a material change in the ownership or management of the foreign
bank for which CBK has reasonable grounds for concern.

1.2. there is a material decline in the financial condition of the foreign bank or the
foreign bank is subject to sanctions by its home country supervisor for material
violations of law or regulations or unsafe or unsound practices,

1.3. the CBK considers that the operations of the branch might endanger financial
stability of the banking sector or be detrimental to the interest of the depositors, or

1.4. the CBK considers the supervision of the home country supervisor to be
inadequate.

Article 13
Voluntary Termination of Operations

No bank may terminate its activities in Kosovo without presenting first to the CBK a plan
to satisfy its liabilities in Kosovo and obtaining prior approval of such plan from the
CBK. Provisions of Article 78 shall apply to any voluntary liquidation.

Article 14
Revocation of a License

1. The license of a bank may be revoked by decision of the CBK on one or more of the
following grounds:

1.1. the CBK has approved a plan for the bank to terminate its operations in
Kosovo, and the bank has complied with such plan;

1.2. the bank has violated any provision of this Law, any order or regulation of the
CBK, or any condition or restriction attached to an authorization issued by the
CBK;

1.3. the bank has engaged in unsafe or unsound practices in the judgment of the
CBK;

1.4. the license has been obtained on the basis of false information submitted by or
concerning the applicant;

1.5. the bank has not commenced operations within ninety days after the receipt of
the license, or such further period as may be determined by the CBK, or has

12 ceased for more than three (3) months to engage in the business of receiving
deposits;

1.6. another bank that holds a significant interest in the bank has had its license
revoked;

1.7. a merger, amalgamation or sale of substantially all of the assets of the bank
has occurred;

1.8. the activities of the bank differ substantially from those presented in the
application for a license and, in the opinion of the CBK, such difference is not
justified nor approval for such changes has been granted by CBK;

1.9. if the licensee is a foreign bank, the foreign bank has lost the authority to
engage in the business of banking in the country of its head office; or

1.10. there has been a significant change in the ownership as provided in Article
37 of this law, without approval of the CBK.

2. The license of a bank shall be revoked by a decision of the CBK if the CBK determines
that the bank is insolvent or that it may reasonable be expected to become insolvent.

3. For purposes of this Article “insolvent” means the bank is not paying its obligations as
they fall due or the value of its liabilities exceeds the value of its assets. The value of a
bank’s assets, liabilities and regulatory capital shall be determined in accordance with
valuation standards and procedures prescribed by the CBK. In determining the value of a
bank’s assets and liabilities for a future date, the bank’s reasonably anticipated future
income and expenses until that date shall be taken into account.

4. A decision by the CBK to revoke or not to revoke a license shall be communicated in
writing to each bank and shall give the grounds for the decision and shall be effective on
the date of such communication.

5. A decision to revoke a license shall be published in one or more newspapers of general
circulation wherever the offices of the bank are located.

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PART III
CAPITAL AND LIQUIDITY REQUIREMENTS

Article 15
Minimum Paid-in Capital for Domestic Banks

1. Each bank shall at all times maintain paid-in capital of not less than seven million
(7.000.000) Euro, or such higher amount as specified by regulation or order of the CBK.

2. Paid-in Capital cannot be treated as such if the funds originate from:

2.1. loans granted by the bank into which capital payment is being made; or

2.2. loans where the bank receiving capital is a guarantor;

2.3. loans from other banks in Kosovo, except if they are collateralized 100% with
approved securities held by third party as

3. Shares issued in exchange for services shall not be treated as paid-in capital.

4. Existing banks must satisfy this minimum paid-in capital requirement within 6 (six)
months of the effective date of this Law.

Article 16
Minimum Regulatory Capital for Domestic Banks

1. Each bank shall at all times maintain regulatory capital determined on a risk-adjusted
basis as specified by regulation or order of the CBK.

2. The CBK may specify by regulation or order additional regulatory capital
requirements, including establishment of a leverage ratio.

3. The CBK shall prescribe by regulation or order the manner in which the regulatory
capital requirements of this Article shall be applied on a group-wide basis to a banking
group.

14 Article 17
Requirements for Branches of Foreign Banks

1. Each foreign bank operating in a branch in Kosovo shall maintain claims on residents
of Kosovo in excess of its liabilities to residents of Kosovo by such amount as specified
by regulation or order of the CBK.

2. Each foreign bank operating in a branch in Kosovo, if so directed by the CBK, shall
maintain a capital equivalency deposit with the CBK, in such amount as specified by
regulation or order of the CBK. The deposit must remain in the custody of the CBK
while the foreign bank operates a branch in Kosovo unless the CBK has approved another
arrangement.

3. The minimum regulatory capital requirements for banks set forth in Article 16 of this
law shall not apply to foreign banks that are licensed to operate one or more branches in
Kosovo.

Article 18
Dividends and Other Capital Distributions

1. No bank shall pay a dividend or make any other capital distribution without the
approval of the CBK. In no event will approval be granted if, in the opinion of the CBK,
after making such distribution, the bank would have less than the minimum paid-in or
regulatory capital required by this Law or by regulation or order of the CBK.

2. Paragraph 1. of this Article shall not apply to a foreign bank that is licensed to operate
one or more branches in Kosovo unless the bank has been required by the CBK to hold a
capital equivalency deposit under paragraph 2. Article 17 of this Law and the payment of
the dividend or capital distribution would leave the bank unable to meet its capital
equivalency deposit requirement.

Article 19
Liquidity Requirements

1. The CBK should prescribe liquidity requirements for banks and banking groups by
regulation or order.

2. Such liquidity requirements should include a minimum aggregate amount of liquid
assets or specific categories of such assets to be held by the bank.

3. Each bank and each banking group shall develop written policies and procedures for
management of liquidity risk. A copy of these policies and procedures shall be reviewed
by the Directors annually and must be submitted to the CBK. Updated versions of the
policies and procedures must also be provided to the CBK.

15 Article 20
Specific Risk Management Policies and Procedures

1. As part of its overall policies and procedures for risk management, each bank at a
minimum shall develop and maintain written policies and procedures regarding:

1.1. the maximum aggregate amount of real estate and fixed assets, or specific
categories thereof to be held by the bank; and

1.2. prohibitions, restrictions or conditions concerning:

1.2.1. the types or forms of exposures made, and liabilities assumed
(contingent or otherwise);

1.2.2. matching as to maturity and interest rate in respect of assets and
liabilities (contingent or otherwise);

1.2.3. unhedged positions in foreign currencies, precious metals or
precious stones, exchange and interest rate instruments; stocks and other
transferable securities; and

1.2.4. forward contracts, swap agreements, futures, options, and other
derivatives relating to currencies, stocks, bonds, precious metals or interest
rates.

1.3. management of all types of operational risks including but not limited to plant
security, technology and personnel.

PART IV
GOVERNANCE AND OWNERSHIP OF BANKS

Article 21
Organization of Banks

All banks shall be firstly organized as joint stock companies and registered at the
Ministry of Trade and Industry or its successor Ministry with all shares registered in the
name of their beneficial owners, the shareholders. A share in the joint stock company is
the property of the shareholders. However in order to operate as a bank, evidence of the
registration shall first be presented to CBK and thereafter the joint stock company shall
be regulated solely by the CBK under this Law.

16 Article 22
Charter and Statute

1. All banks operating in Kosovo must have a Charter and/or statute, a copy of which has
been approved by the CBK. No bank, other than a foreign bank licensed to operate one or
more branches in Kosovo, may amend its charter or by-laws without the prior written
approval of the CBK.

2. A foreign bank with a licensed branch or subsidiary in Kosovo shall provide notice to
the CBK of any amendment to its charter or equivalent establishing documentation or
statute within thirty (30) days of the effective date of any such change.

3. Each bank shall maintain on file with the CBK a duly certified copy of its charter or
equivalent establishing documentation, its statute, and a list of the officials of the bank
who are currently authorized to obligate the bank, together with their specimen signatures
and a description of the limits of their authority.

Article 23
Bank Bodies

1. Bodies of the bank are:

1.1. General Meeting of Shareholders;

1.2. Board of Directors; and

1.3. Senior Management.

Article 24
General Meeting of Shareholders

1. The General Meeting of Shareholders of the bank shall be composed of shareholders:

1.1. the General Meeting of Shareholders shall normally be held at the place of
the bank’s headquarter;

1.2. the General Meeting of Shareholders shall be chaired by its Chairman, who
shall be elected at the beginning of the General Meeting of Shareholders session;

1.3. upon proposal of the Chairman, General Meeting of Shareholders shall
appoint a person in charge of the minutes and appoint members of the General
Meeting of Shareholders’ Voting Committee;

17 1.4. chairman and members of the Board of Directors and at least one member of
Senior Management shall be present during General Meeting of Shareholders
session;

1.5. members of the Board of Directors in a bank consisting of five shareholders
or less are not obliged to be present at General Meeting of Shareholders session;
and

1.6. in a bank with a single shareholder the authorities of the General Meeting will
be carried out by the shareholder.

2. A General Meeting of Shareholders shall be held at least once a year:

2.1. the Board of Directors, except for the cases otherwise provided by this Law,
shall convene a General Meeting of Shareholders;

2.2. any Shareholder who was placed on the list of shareholders at the Registry
thirty (30) days before the date of the General Meeting of Shareholders session
shall have voting rights in the General Meeting of Shareholders; and

2.3. bank shall cover expenses of the General meeting of Shareholders session.

3. Convening the General Meeting of Shareholders:

3.1. notification of a summary of the items to be discussed, place, date and time of
the General Meeting of Shareholders session shall be published in at least one of
the daily newspapers published within Kosovo, no later than ten (10) days before
the date determined for the General Meeting of Shareholders session;

3.2. if the General Meeting of Shareholders session was convened at a place
located outside of headquarters of the bank, notification provided by paragraph 1.
of this Article shall within the same time period be sent to each of the
shareholders by registered mail, fax or electronic mail.

4. Convening an Emergency General Meeting of Shareholders:

4.1. a majority of members of the Board of Directors may vote to hold an
Emergency General Meeting of the Shareholders and may vote to hold this
Emergency General Meeting of the Shareholders in less than the ten (10) days
required in paragraph 3. of this Article. However, every shareholder must be
notified of the emergency General Meeting of the Shareholders, including its
purpose and the proposed Agenda in the manner provided in Paragraph 3 of this
Article. The Emergency General Meeting of the shareholders may only be held if

18 shareholders holding an aggregate total of seventy-five percent (75%) of the
outstanding shares are represented and are available to vote. Further, any action
taken at the Emergency General Meeting of the Shareholders must be approved
by two thirds (2/3) of the number of shares represented.

5. Decision Making at General Meetings of Shareholders:

5.1. shareholder or group of shareholders with at least five percent (5%) of the
total number of shares with voting rights, shall have right to propose in writing
amendments to the agenda and the proposal of the decisions of the General
Meeting of Shareholders not later than eight days from the day of publication of
notification provided by paragraph 3. of this Article.

6. A request for convening the General Meeting of shareholders may be submitted by:

6.1. shareholder or group of shareholders with more than ten percent (10%) of the
total number of shares with voting rights:

6.1.1. two (2) members of the Board of Directors; or

6.1.2. the Board Audit Committee.

6.2. a request for convening the General Meeting of Shareholders with proposal
on its agenda shall be submitted to the Board of Directors in written form;

6.3. if the Board of Directors within thirty (30) days from the day the request was
submitted, fails to publish notification on convening the General Meeting of
Shareholders session in a manner provided by paragraph 3. of this Article, the
person who submitted the request is authorized directly to convene the General
Meeting of Shareholders session in the same manner and shall inform the CBK
about it in writing;

6.4. persons provided by paragraph 1. of this Article are authorized directly to
convene the General Meeting of Shareholders session where the General Meeting
of shareholders had not been convened six months after expiration of the period
for making of the annual report;

6.5 General Meeting of Shareholders may make decisions only if shareholders
with more than fifty percent (50%) of the shares with voting rights are represented
in person or through proxies;

19 6.6. if upon expiration of sixty (60) minutes from the set time of commencement
of General Meeting of Shareholders a quorum is not reached for decision making
provided by Paragraph 1. of this Article, General Meeting of Shareholders shall
be postponed, and the Board of Directors shall not earlier than fifteen (15) and no
later than thirty (30) days from initially set up date for convening it publish
notification on reconvening the General Meeting of Shareholders.

7. General Meeting of Shareholders of bank shall make decision on:

7.1. establishment of bank’s Paid in Capital through the issuance or increase of
Common Shares and the issuance or increased of Preferred Shares;

7.2. appointment of external auditor;

7.3. annual financial report, with the reports of external auditor and the Board of
Directors;

7.4. distribution of profit and payment of dividend;

7.5. manner of loss coverage;

7.6. consolidation with other enterprises and merger of other enterprises with the
bank, including consolidation or merger of subsidiaries;

7.7. division and termination of the bank;

7.8. purchase, sale exchange, leasing and other transactions with property, directly
or through subsidiaries within a business year, to the extent that exceeds one third
of the bookkeeping value of property of the bank;

7.9. sale and purchase of property with accounting value between fifteen percent
(15%) and thirty three (33%) of the total existing property of the bank if such a
transaction is not previously approved by unanimous decision of the Board of
Directors;

7.10. election and removal of the members of the Board of Directors on an
individual basis;

7.11. establishment, reorganization and liquidation of subsidiaries, and approval
of their respective charters;

20 7.12. compensations for the members of the Board of Directors and external
members of the Board Committees;

7.13. adoption, changes and amendments to the charter;

7.14. approving the issuance of new shares of the existing class in an amount of
up to one third of the nominal sum value of the existing shares and determine the
amount, time of sale and price of these shares, that may not be less than the
average market value of the existing shares of the same class in the thirty (30)
consecutive days prior to the day of decision making; and

7.15. other issues important for business operation of the bank, in accordance with
Law and charter of the bank.

8. A Shareholder shall have the right, from the day of publication of notification on
convening the General Meeting of Shareholders in the bank premises, to review the
financial statement, with the reports of external auditors, the Board of Directors as well as
other documents that concerned proposal of the decisions placed on the agenda of
General Meeting of Shareholders.

9. Voting at General Meetings of Shareholders:

9.1. the General Meeting of Shareholders shall make decisions by majority of
shares with voting rights;

9.2. voting at the General Meeting of Shareholders shall be conducted through
ballot papers that shall contain name or company name of the shareholder and the
number of votes at his/her disposal;

9.3. the Voting Committee shall determine results of voting; and

9.4. minutes shall be signed by the chairman of the General Meeting of
Shareholders and the person in charge of minutes.

10. Decision Making Through Proxies:

10.1.shareholders’ proxy shall have authorization for representation by
shareholders signed by a shareholder who is a natural person or representatives of
the shareholder who is a legal person;

10.2. the Proxy holders shall deliver to the Voting Committee a written
authorization for representation by the shareholders;

21 10.3. voting Committee shall check validity of authorization and identity of the
proxy;

10.4. if a shareholder or his proxy, within five (5) days from the day of General
Meeting of Shareholders, deliver certified statement of the shareholders to the
Voting Committee, public document or other verifiable evidence that denies
validity of authorization to the Voting Committee, it shall declare votes based
upon such authorization to be invalid and inform the Board of Directors about in
writing.

10.5. the Board of Directors shall suspend enforcement of the decision, passing of
which was decisively influenced by invalid votes and it shall convene the General
Meeting of Shareholders for repeated decision making on these issues no later
than thirty (30) days from the day of receipt of notification of the voting
Committee on invalid votes.

11. Minutes of General Meeting of Shareholders:

11.1. minutes shall be made of the work of the General Meeting of Shareholders
and it shall contain:

11.1.1. company name and address of the headquarters of the bank;

11.1.2. place and time of the General Meeting of Shareholders;

11.1.3. first name and family name of the Chairman, person in charge of
minutes and members of voting committee;

11.1.4. agenda;

11.1.5. decisions;

11.1.6. data about voting; and

11.1.7. objections of shareholders and members of Board of Directors to
the General Meeting of Shareholders decisions.

11.2. minutes shall be accompanied with proposals in writing and the reports
submitted to the General Meeting of Shareholders.

11.3. the Board of Directors shall ensure that the minutes be made no later than
thirty (30) days from the day of organizing the General Meeting of Shareholders.

22 Article 25
Contest of the General Meeting of Shareholders Decisions

1. A decision of the General Meeting of Shareholders shall be null and void if:

1.1. General Meeting of Shareholders was not convened in a manner determined
under Article 24 of this Law;

1.2. was not entered into the minutes;

1.3. nullity is determined by a court decision.

2. A procedure to contest and annul the decision of the General Meeting of Shareholders,
with the Court, may be initiated by:

2.1. a shareholder representing minimum of thirty three (33%) ownership and
who attended the General Meeting of Shareholders, whose objection to the
decision was entered into the minutes, or was not entered correctly; or

2.2. a shareholder who was not present at the General Meeting of Shareholders
due to convening the General Meeting of Shareholders contrary to the provisions
under the Article 24 of this Law.

2.3. the Board of Directors and Senior Management and each member of the
Board of Directors and Senior Management, if enforcement of the decision would
constitute an economic offense or crime or create damage to the bank.

3. Procedures provided under Paragraph 1 and 2. of this Article may be initiated no later
than sixty (60) days from the day of General Meeting of Shareholders.

4. According to the Procedures provided under Paragraph 1 and 2. of this Article, bank
shall be represented by Chief Executive Officer or other member of the Senior
Management, upon authorization issued by Chief Executive Officer.

Article 26
Board of Directors

1. Each bank shall be administered by a Board of Directors, and subject to the following
requirements:

1.1. the Board of Directors shall consist of an uneven number of not less than five
(5) members. All board members have a right to vote. Majority of these members
should be independent, non-executive directors and at least one of them should be
resident in Kosovo;

23 1.2. the Board of Directors shall be elected by the bank’s shareholders at a
General Meeting of Shareholders and shall be responsible for establishing its
policies, including risk management policies, and for supervision of their
implementation;

1.3. the Board of Directors will elect a Chairman from amongst its members,
except that the Chief Executive Officer of the bank can not be the Chairman.

1.4. members of the Board of Directors other than the Chief Executive Officer
shall be appointed for terms of not more than four (4) years and may be reelected
for subsequent terms;

1.5. the chief executive officer serves on the board according to the official duty
and without right to vote so long as he or she holds office;

1.6. the Board of Directors may not delegate its responsibilities to others; and

1.7. the names of the members of the Board of Directors shall be entered into a
Registry maintained at the CBK.

2. The meeting of shareholders may establish remuneration for Board members provided,
however, that remuneration of the Board Members and Senior Management of a bank
shall be taken into account as part of the CBK’s examination of the condition of the bank
pursuant to Article 57 below to consider whether the remuneration arrangements
constitute an unsafe and unsound practice.

3. A Director is independent for purposes of this Article if they are independent of
management and shareholders and their judgment will be exercised for the sole benefit of
the bank and there is no perceived or actual conflict of interest arising from his or her
relationships with the bank and with bank-related parties, whether present, past or future,
and other relevant facts and circumstances. An independent Director may hold shares in
the bank directly subject to such limitation on holdings as the CBK may determine.

4. This article shall not apply to a foreign bank that is licensed to operate one or more
branches in Kosovo.

5. The following person may not be Chairman or member of Board of Directors of a
bank:

5.1. person convicted of crime or found to be liable for an economic offence
within the Penal Code;

24 5.2. person who, pursuant to the court decision was denied ability to conduct
activities within competence of Board of Directors; and

5.3. person older than seventy (70) years of age on the day of appointment.

6. Elected officials, Ministers and Deputy Ministers of State and Municipal Governments
and their respective Institutions may not serve as members of the Board of Directors of
any bank while they are so employed and for a period of one (1) year thereafter.

7. All employees of the State, Municipal Governments and their respective Institutions
who serve as members of a Board of Directors of any bank must rescue themselves and
refrain from involvement in any discussions or decisions within the government having to
do with the bank for which they are a member of the Board of Directors.

8. A shareholder of a group of shareholders with at least five percent (5%) of the shares
with voting rights may nominate a candidate for member of the Board of Directors, or file
a resolution at a shareholder meeting for the removal of a member of the Board of
Directors.

9. Each proposal provided under Paragraph 1. of this Article shall be submitted in writing
no later than eight (8) days from the day of publication of notification on convening the
General Meeting of Shareholders that has on its agenda election of the members of the
Board of Directors.

10. Candidates for members of the Board of Directors shall before voting give statement
in writing on their acceptance of nomination.

11. In the election of or removal of the members of the Board of Directors each
shareholder may cast one vote for each share with voting rights. Each shareholder with
voting rights may cast all votes for one person or distribute their votes to more than one
person.

12. The Members of the Board of Directors shall enter into employment contracts with
the bank that are subject to approval by the General Meeting of Shareholders.

Article 27
Meetings of the Board of Directors

1. A session of the Board of Directors shall be held when necessary, and at least once a
quarter. At least once a year one of the quarterly meetings must be held in Kosovo. Other
than the annual meeting held in Kosovo, all other meetings may be held via
teleconferencing or other electronic means.

25 2. Chairman of the Board of Directors shall convene the sessions upon request of the
Chief Executive Officer of the bank or two (2) members of the Board of Directors no
later than fourteen (14) days from the day of submission of the request, otherwise person
who submitted the request shall be authorized for convening the session. However,
provided that all members of the Board of Directors are invited and the invitation is
accompanied by an Agenda, a majority of members of the Board of Directors may
convene an emergency session within three (3) days of the vote to convene such
emergency session of the Board of Directors. All provisions of this Article apply to
emergency meetings of the Board of Directors.

3. Decision of the Board of Directors shall be valid when majority of its members are
present and vote.

4. Decisions shall be taken by simple majority of votes of the members present, excluding
the case when in the bank Statute is foreseen a higher majority.

Article 28
Competences of the Board of Directors

1. The Board of Directors of the bank shall be competent to:

1.1. supervise business operation of the bank;

1.2. supervise work of Senior Management;

1.3. adopt a report of Senior Management on the business operations based upon
the semi-annual balance sheet, profit and loss statement, annual balance sheet and
internal and external audit reports;

1.4. submit an annual report to the General Meeting of Shareholders on business
operations of the bank, which shall include internal and external audit reports,
report on work of the Board of Directors as well as the plan for business
operations for the following business year;

1.5. appoint Senior Management of the bank;

1.6. propose distribution and manner of use of profit and manner of loss coverage;

1.7. approve all purchase, sale, exchange, leasing and other property transactions
directly or through Subsidiaries during the business year that are equal to or
exceed ten percent (10%) of the capital of the bank;

26 1.8. ensure that appropriate internal controls for the bank are established and
maintained;

1.9. ensure that appropriate internal and external audits are performed;

1.10. establish provisions for loan losses to be expensed; establish necessary
reserves out of the net profit of the bank and declare dividends;

1.11. appoint chairmen and members of the committee for compensation and the
committee for appointment;

1.12. establish ad hoc commissions and determine their compositions and tasks;

1.13. convene the General Meeting of Shareholders;

1.14. approve internal acts, business and other policies and procedures as the
Board of Directors deems appropriate; and

1.15. decide on issues not specifically directed under the Law or its charter to
some other decision making body of the bank.

2. Chairman and members of the Board of Directors shall carry out their commitments
and responsibilities in accordance with the interest of the shareholders and bank and may
not perform any activity that would compete with activities of the bank without advice
and consent of other members of the Board of Directors.

3. Chairman and members of the Board of Directors shall each be required to disclose
and report to the Board of Directors any personal or financial interest with the legal
person with which bank has or intends to enter into business relationship. In such a case
that Director may not take part in the discussions or make a decision on issues that
concern relations of bank and any legal persons in which Chairman and member of the
Board of Directors shall have direct or indirect financial interest.

4. Chairman and members of the Board of Directors may be held either individually or
jointly and severally liable for damages caused by failure to comply with the provisions
of this article.

5. Chairman and members of the Board of Directors shall have right to request all the
data on business operations and the presence of members of the Senior Management to
the sessions of the Board of Directors.

27 Article 29
Board Committees

1. Board of Directors of each bank shall establish an Audit Committee, the members of
which are selected from among the non-executive directors and external experts. A
majority of the members of the Audit Committee shall be non-executive directors. At
least one member of the Audit Committee shall be an outside expert in the field of
accounting or audit who meets the criteria for independence of directors in Article 26,
Paragraph 3. of this law. The Audit Committee shall:

1.1. meet at least quarterly and at such other times as provided for in the by-laws;

1.2. recommend appropriate accounting, operational and administrative internal
controls;

1.3. supervise the bank’s compliance with policies and procedures;

1.4. request and review reports from the bank’s chief internal auditor;

1.5. recommend compensation for the chief internal auditor;

1.6. monitor compliance with this Law and applicable regulations or orders;

1.7. recommend the appointment of an external auditor pursuant to Article 54 of
this law;

1.8. monitor the performance of the external auditor, review the external auditor’s
report on the bank’s financial statements and report any findings to the Board of
Directors; and

1.9. deliver opinions to the Board of Directors on any matters submitted to it by
the Board of Directors, or that the committee wishes to address.

2. Each bank, other than a foreign bank, shall establish a Risk Management Committee
that shall consist only of members of the Board of Directors. The Risk Management
Committee shall:

2.1. meet at least quarterly and at such other times as provided for in the by-laws;

2.2. monitor implementation of the bank’s policies and procedures for risk
management, including the effectiveness and independence of risk management
functions within the bank;

28 2.3. monitor the risk profile of the bank, including the credit, market, liquidity,
operational, compliance, reputation, legal and other risks of the bank;

2.4. monitor compliance with this Law and regulations and orders there under;
and

2.5. deliver opinions to the Board of Directors on any matters submitted to it by
the Board of Directors or that the committee wishes to address.

3. The CBK may require all or some Banks to have additional Board Committees. Each
bank may also decide to have other board committees and such operational committees as
the Board of Directors or Senior Managers consider necessary or appropriate.

4. Committee meetings may be held by means of telecommunications equipment so long
as the committee members participating in the meeting can simultaneously hear all other
committee members participating in the meeting.

5. This article shall not apply to a foreign bank that is licensed to operate one or more
branches in Kosovo, so long as comparable requirements satisfactory to the CBK are
applicable under the law under which the foreign bank is licensed in its home
jurisdiction.

Article 30
Senior Management

1. The Chief Executive Officer will be appointed by the Board of Directors of the bank.
The Deputy Chief Executive Officer and other Senior Managers will be appointed by the
Board of Directors on the recommendation of the Chief Executive Officer.

2. The term in office for the Chief Executive Officer shall be four (4) years, which may
be renewed without any limitations as to the number of terms.

3. The position, authorities, responsibilities, rights and remuneration shall be regulated by
contract between Chief Executive Officer and Deputy Chief Executive Officer.

4. The Chief Executive Officer and Deputy Chief Executive Officer cannot be appointed
without the prior approval of the CBK.

5. The Chief Executive Officer of a bank shall:

5.1. be responsible for the legality of the bank’s operation and implementation of
the established business strategy of the bank;

29 5.2. represents the bank and acts as it agent;

5.3. execute decisions of the General Meeting of Shareholders, the Audit Board
and the bank’s Board of Directors;

5.4. organize and manage the bank’s operations;

5.5. make decisions about all matters which are not in the jurisdiction of the
General Meeting of Shareholders, the Audit Board or the Board of Directors of a
Bank; and

5.6. perform other functions in accordance with the law, the bank’s charter and its
general acts.

6. The Director may delegate part of his powers to others.

7. Individuals appointed as members of Senior Management of a bank cannot be older
than sixty five (65) years old and must meet all requirements set by the CBK regulations
and general acts of the bank.

8. If the CBK rejected a request to approve an individual, in accordance with Article 34
of this Law, the bank cannot file another request for the appointment of that individual
for the same position until the reasons stated in the CBK decision on rejection are
eliminated.

Article 31
Senior Managers

1. Deputy Chief Executive Officer shall substitute for the Chief Executive Officer in case
of his/her absence, and if the bank has no Deputy Chief Executive Officer appointed, the
Chief Executive Officer shall authorize in writing one of the other Senior Managers to
substitute for him and determine his/her authorities.

2. Salary and other material rights of the Senior Managers shall be regulated by contract
between the Chief Executive Officer and the Senior Managers, upon prior approval of the
Board of Directors.

3. Chief Executive Officer, Deputy Chief Executive Officer and the Senior Managers
shall report to the Board of Directors each direct or indirect interest with Related
Individuals or any the legal person with which bank has or intends to enter into business
relationship.

30 4. In case provided under Paragraph 1 of this Article, the Senior Manager may participate
in such a business relation based upon written consent of the Board of Directors.

5. In any case when the Chief Executive Officer is released of duty, resigns, dies or is ill
or otherwise absent from his/her duties without the prior approval of Board of Directors
for a period of more than thirty (30) consecutive calendar days, the Board of Directors
must confirm the Deputy Chief Executive Officer in this position or appoint an interim
Chief Executive Officer to serve until such time as the Board of Directors appoints a new
Chief Executive Officer.

Article 32
Internal Auditor

1. The Board of Directors of a bank shall appoint an Internal Auditor, unless exempted
from this requirement by the CBK. The bank shall provide that the Internal Auditor
reports directly to the Audit Committee of the Board of Directors.

2. Salary and other material rights of the Internal Auditor shall be determined by contract
signed by the Board of Directors and the Internal Auditor.

3 The Internal Auditor is responsible for identifying, monitoring and assessing risks in
the operation of a bank and determining whether the system of internal control is in place
that insure that those risks are managed in the manner so that the risks are mitigated in an
acceptable measure. The bank shall provide the Internal Auditor with sufficient resources
to enable him/her to carry out his/her responsibilities.

4. In performing his/her responsibilities, the Internal Auditor shall have authorities for
unrestricted and unimpeded work and he/she is obliged to report to the Audit Committee
of the bank.

5. Individuals appointed as Internal Auditor cannot be related by marriage or blood to the
third degree of consanguinity to any member of the Board of Directors, Senior
Management or any person who holds a significant Ownership Interest.

Article 33
Conflict of Interest

1. Each Director and Senior Manager, on assuming office, shall be required to provide an
annual notice in writing to the Board of Directors disclosing the names, addresses and
particulars of such Director and Senior Manager’s then-current material commercial,
financial, agricultural, industrial or other business or family interests.

31 2. In addition, on a continuing basis, and prior to the execution of any material contract
with the bank that comes or ought reasonably to come to the attention of the Board of
Directors, Senior Managers shall disclose in writing to the Board of Directors, any
material interest in, or a material relationship to, any person who is a party to a material
contract or a proposed material contract with the bank.

3. Any Director or Senior Manager who has a material interest or a material relationship
within the scope of this section shall leave any meeting at which the matter is discussed
while the matter is under consideration or subject to vote, and shall refrain from voting on
any matter related thereto that comes before the Board of Directors.

4. An interest shall be material if it is Significant Interest with reference to the financial,
or business interests of the person or to a Related Individual of that person having the
interest, and a person has a material interest in any company if the person owns, directly
or indirectly, a Significant Interest in the company, or is an Director or Senior Manager
of the company and has a Significant Interest in any partnership if the person is a partner.

5. Where a Director and Senior Manager fails to disclose a material interest or
relationship in accordance with this section a court of competent jurisdiction may, on the
application of the bank, a bank shareholder, or the CBK, set aside the contract, if any, on
such terms as it thinks fit. In addition, the CBK may, by written order, suspend the
Director and Senior Manager from office for any period not exceeding one year, remove
the Director and Senior Manager from office permanently, or impose any other sanctions
provided for under this Law.

6. Banks shall introduce suitable arrangements and procedures so that they and their
Directors, Senior Managers and employees are not placed in a situation where their duty
to one customer conflicts with their duty to another, or where their own interest conflicts
with their duty to a customer.

7. Directors, Senior Managers and employees of banks have a fiduciary duty of
independence, loyalty and diligence to the bank that they serve and to the bank’s
depositors to place the bank’s interests before their own interest.

8. No Director or Senior Manager may enter into a contractual relationship as a person or
on behalf of a bank with a Related Individual unless the contractual agreement is
approved by the CBK.

Article 34
Appointment or Replacement of Directors and Senior Managers

1. Except as provided below, no person shall become a Director or Senior Manager of a
bank without obtaining the prior approval of the CBK.

32 2. Paragraph 1. of this Article shall apply to a foreign bank licensed to operate one or
more branches in Kosovo only with respect to the appointment of the branch manager or
other Directors and Senior Managers of the branch or branches operating in Kosovo.

3. Following receipt of preliminary approval from the CBK of an application for a license
to operate a branch or branches in Kosovo, a foreign bank must notify the CBK of any
replacement of Directors and Senior Managers of the foreign bank.

Article 35
Qualification of Directors and Senior Managers

1. Each Director and Senior Manager of a bank must be fit and proper and of good repute
and must meet the criteria established by the CBK regarding qualifications, experience
and integrity; provided, however, that no person shall be regarded as a fit and proper
person if the person:

1.1. has been removed from an office at a bank by the CBK; or has been
convicted by a criminal court of an offense for which the person was or could
have been sentenced to imprisonment for a term of one year or more without the
option of a fine;

1.2. has been a debtor in a bankruptcy or insolvency proceeding within the past
ten (10) years;

1.3. has been disqualified or suspended by a competent authority from practicing
a profession on grounds of personal misconduct; or

1.4. has been a Director or Senior Manager of a bank whose license has been
revoked or whose insolvency or other involuntary liquidation has been initiated
during the Director’s or Senior Manager’s term of office.

2. In exceptional circumstances, having been satisfied as to the qualifications,
professional experience and conduct of a person, the CBK may exempt a Director or a
Senior Manager from the provisions of sub-paragraph 1.4. of this Article after the
expiration of an appropriate period following the relevant event, and from the provisions
of sub-paragraph 1.1. of this Article after the expiration of ten (10) years following the
relevant event.

3. A person may not be appointed or elected as a Director or Senior Manager of a bank if,
at any time during the immediately preceding six (6) months, the person has served in a
position with the CBK.

33 4. Any bank becoming aware of circumstances that indicate that any of the Directors or
Senior Managers may not be a fit and proper person shall notify the CBK. Failure to
comply with this requirement may result in administrative sanctions under Article 58 of
this Law.

Article 36
Removal of Directors and Senior Managers

1. Upon determining that a Director or Senior Manager does not satisfy the criteria set
forth in Article 26 of this law, the CBK shall provide a notice of disqualification of the
Director or Senior Manager to the bank and directly to the Director or and Senior
Manager.

2. If ten (10) days from the date of the notice of the disqualification from the CBK, the
Director or Senior Manager has not resigned or been removed from office by the bank,
the CBK shall order the removal or resignation of the Director or Senior Manager and
may impose sanctions on the bank and on the Director or Senior Manager for non-
compliance in accordance with Article 58 of this Law.

Article 37
Approval of Principal Shareholders

1. No person, acting directly or indirectly, alone or in concert with another person, shall
become a principal shareholder in a bank without obtaining prior written authorization
from the CBK.

2. No principal shareholder, acting directly or indirectly, alone or in concert with another
person, shall increase their ownership interest in a bank above 10, 20, 33, 50 or 75
percent (%) of the equity without obtaining prior authorization from the CBK.

3. Applications for the acquisition of equity interest in a bank or increases in holdings of
equity interests in a bank shall be in such form as prescribed by the CBK and shall
include:

3.1. the name, nationality, place of residence, and business or professional history
for the past ten (10) years of the applicant, and any ultimate beneficial owner of
the applicant that, as a result of the transaction, would indirectly acquire five
percent (5%) or more of the equity interests of the bank;

3.2. a list of undertakings in which the proposed owners, including the ultimate
beneficial owners (as described above), holds participations, specifying the size of
such participations and the registered address of those undertakings;

34 3.3. for each natural person applicant, an official statement from the Court
disclosing any convictions for offenses by a criminal court, personal bankruptcy
filings, disqualifications from practicing a profession, or past or present
involvement in a managerial function of a body corporate or other undertaking
subject to insolvency proceedings, if any;

3.4. for each legal entity applicant, audited financial statements for the past three
(3) years;

3.5. the terms and conditions of the proposed acquisition;

3.6. the source and amount of the funds to be used in making the acquisition;

3.7. any plans or proposals regarding a major change in the bank’s business,
corporate structure or management;

3.8. in any case where the acquisition would cause the bank to become a
subsidiary of a foreign bank, a statement that the foreign supervisory authority
responsible for the prudential supervision of the foreign bank in its home country
has no objection to the proposed establishment of operations in Kosovo, and
exercises global consolidated banking supervision over the foreign bank; and

3.9. such other information as the CBK may require.

4. Each bank shall notify the CBK of any acquisition of shares within five (5) days after
the acquisition if the amount of shares acquired equals or exceeds five percent (5%) of
the equity but does not exceed ten percent (10%). The notification shall be in such form
and contain such information as the CBK may require.

5. The restrictions of paragraphs 1. and 2. of this law shall not apply to acquisitions of
shares in a foreign bank that is licensed to operate one or more branches in Kosovo, so
long as the foreign bank notifies the CBK of any acquisition where the amount of shares
acquired equals or exceed five percent (5%) of the equity of the foreign bank.

Article 38
Approval or Disapproval of Acquisitions of Equity Interests in a Bank

In making a determination whether to approve an application to acquire an equity interest
in a bank, the CBK shall assess the proposed acquisition with regard to the same criteria
that apply in determining preliminary or final approval of an application for a license
under Article 7 of this law, including but not limited to the expected effects of the
proposed acquisition on the financial soundness of the bank, the resulting ownership

35 structure of the bank and its effect on the CBK’s ability to conduct both solo and
consolidated supervision, and the suitability of the proposed shareholders and their
standing in the financial markets.

PART V
MERGERS, CONSOLIDATIONS AND ACQUISITIONS

Article 39
Bank Mergers, Consolidations & Acquisitions

1. No bank shall merge or consolidate with any other bank or acquire, either directly or
indirectly, all or substantially all of the assets of, or assume the liabilities of, any other
bank, except with the prior approval of the CBK.

2. Applications to merge, consolidate, and acquire all or substantially all of the assets of
or assume the liabilities of a bank shall be in such form as prescribed by the CBK and
shall be accompanied by such information as the CBK shall require.

3. For purposes of making a determination on an application filed under this Article, the
criteria for preliminary approval of an application for a banking license, as set forth in
Article 7 of this chapter shall apply mutatis mutandis.

Article 40
Acquisitions by Banks of Equity Interests in Financial Institutions

1. No bank shall, without the prior approval of the CBK,

1.1. establish or acquire, directly or indirectly, a significant interest in a financial
institution;

1.2. increase its equity interest in a financial institution; or

1.3. accept as collateral a significant interest in a financial institution.

2. The CBK shall prescribe regulations governing the acquisition by banks of equity
interest in financial institutions.

36 Article 41
Acquisitions by Banks of Equity Interests in Non-Financial Companies

1. No bank shall, directly or indirectly hold an equity interest in a legal entity that is
engaged in activities other than financial activities if such interests:

1.1. represents a greater than five percent (5%) interest in such legal entity;

1.2. exceeds fifteen percent (15%) of the bank’s regulatory capital; or

1.3. when aggregated with all such equity interests held by the bank in non-
financial companies, exceeds twenty five percent (25%) of the bank’s regulatory
capital.

2. Notwithstanding paragraph 1. above, no authorization shall be required for:

2.1. equity interests that have been acquired by a bank in foreclosure on or in lieu
of repayment of a loan granted by the bank, in which case the bank shall dispose
of such equity interests within one year from the date they are acquired or within
such longer period as the CBK may permit; or

2.2. equity interests held by a bank as an agent or trustee.

3. The CBK shall prescribe by regulation the manner in which the requirements of this
Article shall be applied on a group-wide basis to a banking group.

Article 42
Application of Law on Business Organizations

All provisions pertaining to the governance and ownership of Joint Stock Company
contained in the Law of Business Organizations that do not otherwise conflict with the
provisions of this Law, shall apply to banks. This Law shall prevail in any determination
of which provisions are to be applied to banks.

37
PART VI
REQUIREMENTS FOR FINANCIAL ACTIVITIES

Article 43
General Principles

Banks shall conduct their activities in accordance with sound policies and procedures, the
requirements of this Law and of applicable regulations and orders.

Article 44
Permitted Financial Activities

1. Banks may be authorized in their licenses to engage in the following financial
activities and subject to limits on exposures specified by Regulation or Order of the CBK:

1.1. receiving deposits (in the form of demand deposits, time deposits, or other
forms of deposit), whether bearing interest or not, in any convertible currency;

1.2. buying and selling for a bank’s own account debt securities issued or
guaranteed by governments or central banks of the Republic of Kosovo or the
European Union that are denominated and payable in the currency of the bank’s
deposits;

1.3. providing payment and collection services;

1.4. issuing and administering means of payment (including payment cards,
travelers’ checks and bankers’ drafts);

1.5. buying and selling foreign exchange for cash for the account of a customer;

1.6. providing for safekeeping of securities and other valuables; and

1.7. extending credit, including: consumer and mortgage credit; factoring with or
without recourse; and financing of commercial transactions and buying and
selling assets from another bank or financial institutions;

1.8. borrowing funds and buying and selling for a bank’s own account or for the
account of customers (excluding underwriting) of money market instruments
(including notes, bills of exchange and certificates of deposit); debt securities;
futures and options relating to debt securities or interest rates; or interest rate
instruments;

38 1.9. acting as intermediary between borrowers and lenders (money brokering);

1.10. financial leasing;

1.11. providing credit information services;

1.12. providing services as a financial agent or consultant (not including services
described in sections;

1.13. dealing in gold or one or more currencies other than the currency in which
the bank’s balance sheet is denominated, including contracts for the future
purchase or sale of foreign currencies;

1.14. providing trust services, including, the investment and administration of
funds received in trust and administration of securities;

1.15. providing services as an investment portfolio manager or investment
adviser;

1.16. underwriting and distribution of debt and equity securities and dealing in
equity securities;

1.17. islamic finance or Islamic banking, with the consent of the CBK and subject
to such conditions and in compliance with such regulations as the CBK may
prescribe;

1.18. any other activity that the CBK shall determine by regulation is related to a
financial activity and that does not conflict with the provisions of this Law.

2. No bank may engage directly in industry, commerce, or activities other than the
financial activities identified above.

3. No bank or financial institution shall engage in financial activities that exceed those
specifically authorized by its license. Banks seeking to engage in activities beyond those
authorized by its license must obtain the prior approval of the CBK.

39 Article 45
Prohibited Transactions and Practices

1. Banks shall refrain from entering into transactions or engaging in practices of any kind
that would provide them, alone or together with others, a position of dominance in the
money, capital or foreign exchange markets, and from engaging in manipulative devices
or predatory pricing practices that could result in an unfair advantage for themselves or
for third parties.

2. No bank shall require any person to contract to receive any financial service or any
goods or other service from an affiliate as a condition of being permitted to contract with
the bank to receive any other financial service from the bank.

3. No bank shall have an exposure secured by its own equity securities.

4. No bank shall purchase its own equity securities or any other instrument that qualifies
as regulatory capital without prior authorization from the CBK.

Article 46
Limitations on Lending Exposures and Deposit Concentration for Banks

1. The maximum aggregate principal amount of credit exposures, expressed as a
percentage of its tier 1 capital, that a bank shall be permitted to have committed or
outstanding to or for the benefit of any single person or to group of connected persons
shall be fifteen percent (15%) or such other percentage as specified by regulation of
CBK.

2. The maximum aggregate principal amount of large credit exposures, expressed as a
percentage of its tier 1 capital that a bank shall be permitted to have committed or
outstanding shall be three hundred percent (300%) or such lower percentage as specified
by regulation.

3. The CBK may prescribe by regulation exemptions from the limitations of paragraph 1.
and 2. of this Article for:

3.1. an exposure that is fully secured by readily marketable collateral;

3.2. transactions with, or guaranteed by, a government; and

3.3. transactions between banks with a maturity of one year or less.

4. Bank policies on credit risk shall at a minimum require board approval of any large
exposure.

40 5. For the purposes of applying this section or any regulations issued pursuant thereto, a
group of connected persons shall be deemed to include any borrower and any other
person with whom such borrower is connected, directly or indirectly, in such a way that
the financial soundness of any of them may affect the financial soundness of the other or
others, or the same factors may affect the financial soundness of some or all of them, or if
as a result of the structure of their relationship the other person is in fact ultimately
responsible for, or benefits from, the exposure outstanding.

6. A bank cannot hold deposits from any one source of funds in an amount greater than
twenty percent (20%) of its total deposits. For the purpose of this paragraph “one source”
is defined to be one legal entity, one person, or the total amount of public revenues from
government entities which are classified as Kosovo Budget Organizations.

7. The CBK shall prescribe by regulation the manner in which the limitations specified in
this section shall be applied on a group-wide basis to a banking group.

Article 47
Transactions with Bank-Related Persons

1. No bank shall enter into a transaction with or for the benefit of a Bank-Related Person,
if such transaction would be entered into on less favorable terms and conditions to the
bank, or not at all, if such counterparty were not related to the bank.

2. Notwithstanding the foregoing, no bank shall have an exposure to or for the benefit of
a Bank-Related Person if, as a result thereof, the aggregate amount outstanding to, or for
the benefit of, Bank-Related Persons would exceed ten percent (10%) of the bank’s Tier 1
capital.

3. Exposures provided by a bank to a bank-related individual are subject to the prior
approval of the Board of Directors of the bank, except to the extent that the CBK exempts
exposures below a de minimis threshold as determined by the CBK. Every exposure
provided by a bank to a bank-related individual shall be promptly reported to the Board
of Directors of the bank.

4. If an exposure has been provided by a bank to a Bank-Related Person in violation of
the provisions of this Article, such exposure must be immediately repaid, and the
members of the Board of Directors, or the designated branch manager, as the case may
be, shall be personally liable, jointly and severally, for payment of principal of, and
interest and other charges on, exposure granted in violation of this section with their
knowledge and without their objection.

5. Exposure extended by any bank to any Bank-Related Person shall be subject to such
additional conditions or restrictions as shall be prescribed by regulation.

41 6. The CBK shall deduct any lending to a Bank-Related Person from capital for purposes
of calculating regulatory capital ratios pursuant to Article 15 and Article 16 of this Law.

7. This article shall not apply to a foreign bank that is licensed to operate one or more
branches in Kosovo.

Article 48
Exposures to Bank Employees

A bank shall not provide financial assistance to any of its employees, or for their benefit,
in excess of limits established by the CBK in a regulation.

Article 49
Asset Classification and Provisioning for all Financial Institutions

1. Each Financial Institution shall maintain adequate provisions for depreciation or
diminution in the value of its assets.

2. Each Financial Institution shall develop and maintain written policies and procedures
regarding the classification and evaluation of assets and provisions to be made on the
basis of such classifications and evaluations.

3. All Financial Institutions must classify all loans and provide for loan loss provisions as
required by Regulation or Order of the CBK.

Article 50
Foreign Currency

The CBK may issue regulations to set the maximum foreign currency exposures that
banks may incur. The maximums may apply to foreign currency exposures generally, to
any specific currency or currencies, or to both.

Article 51
Corporate Records and Records of Transactions

1. Every bank shall prepare and maintain at its head office or in an appropriately secure
location, written records containing:

1.1. its charter or equivalent establishing documentation, statute and all
amendments there to;

1.2. a register of its beneficial shareholders, including the number of shares
registered in the name of each;

42 1.3. minutes of any Board of Directors or committee meetings and resolutions
adopted by the Board of Directors;

1.4. minutes of shareholders’ meetings and resolutions adopted by the
shareholders;

1.5. accounting records exhibiting clearly and accurately the state of its business
affairs, explaining its transactions and financial position so as to enable the CBK
to determine whether the institution has complied with all the provisions of this
Law and with applicable regulations and orders;

1.6. records showing, for each customer of the bank, on a daily basis, particulars
of its transactions with, or for the account of, that customer, and all balances
owing to or by that customer;

1.7. credit documentation and any other information concerning its business
relations with its customers and other persons that the CBK may prescribe by
regulation; and

1.8. such other records as are required by the CBK.

Article 52
Credit Registry

1. The Central Bank of Kosovo established the Credit Registry to collect and provide
information to facilitate reduced risks of lending and to improve access to credit while
ensuring maximum protection of personal data. Credit reporting shall be mandatory for
all financial institutions operating in Kosovo.

2. All Financial Institutions as defined and provided for in a CBK regulation must be
members of the Credit Registry located at CBK. They are required to file with the Credit
Registry all their information on their credits and credit products, borrower repayment
history, and guarantees. For purposes of compliance with this Article, all required fields
of information must be completed. CBK regulations and operational instructions provide
details on compliance, penalties, credit reports, and borrower rights.

3. Information about mortgages, pledges and other collateral can be additionally reported
to the Credit Registry.

43
PART VII
ACCOUNTS AND AUDIT

Article 53
Accounts and Financial Statements

1. Banks shall maintain accounts and records and prepare annual financial statements
adequate to reflect their operations and financial condition and to reflect the operations
and financial condition of their subsidiaries, branch offices, both on an individual and on
a consolidated basis.

2. Accounts and financial statements shall be in such form and detail and in accordance
with internationally-accepted accounting standards, reflecting such additional accounting
rules or standards as shall be prescribed by the CBK.

3. The CBK may prescribe by rule or order other affiliates of a bank for which
consolidated financial statements shall be submitted.

4. A copy of each bank’s audited financial statements, including audited consolidated
financial statements, if applicable, shall be submitted by the bank to the CBK when they
become available and within four months after the end of the financial year at the latest.

5. Each foreign bank with one or more branch offices in Kosovo shall prepare the
financial statements required in paragraph 4. of this Article, showing the foreign bank’s
branches located in Kosovo collectively, as an operating segment of the foreign bank.

Article 54
External Audit

1. The shareholders shall appoint, upon the recommendation of its Audit Committee and
the Board of Directors, an independent and qualified external auditor acceptable to the
CBK who shall, consistent with international audit standards:

1.1. provide an opinion as to whether the annual financial statements present a fair
and true view of the financial condition and performance of the bank in
accordance with the provisions of this Law;

1.2. review the adequacy of the practices and procedures for internal audit and
control practices and procedures and make recommendations for remediation; and

1.3. inform the Board of Directors about any fraudulent activity by an employee
of the bank or any of its subsidiaries or any irregularity or deficiency in its

44 administration or operations that may reasonably be expected to result in a
material loss for the bank or such subsidiary.

2. The external auditor of a bank, or any member of the audit firm, shall not be a bank
related person or an agent or representative of the bank and shall not have any financial
interest in the bank, with the exception of holding a deposit in the bank.

3. The CBK may prescribe by regulation a requirement for rotation of auditors or
engagement partners of audit firms after a specified period of time to ensure continued
independence. The CBK shall have authority to require the removal or replacement of an
auditor, or to directly appoint, remove, or replace an auditor, at the expense of the bank to
do a re-audit, if the bank or the auditor fails to meet the requirements of this Article or
where the CBK is not reasonably satisfied with the auditor’s performance.

4. This article shall not apply to a foreign bank that is licensed to operate one or more
branches in Kosovo, so long as so long as comparable requirements satisfactory to the
CBK are applicable under the law under which the foreign bank is licensed in its home
jurisdiction.

Article 55
Internal Audit

1. The Board of Directors of each bank shall also appoint an internal auditor who shall
report to the Audit Committee and operate independently of management. Each branch
of a foreign bank shall appoint an internal auditor, who must operate independently of
management.

2. The internal auditor shall be given meaningful access to management and members of
management to discuss matters relevant to their functions and shall have the right, upon
request, to obtain from them any information or documentation which he or she shall
require.

3. The internal auditor shall have no authority to bind or represent any bank in contracts
or other transactions.

4. The internal auditor shall:

4.1. review systems of internal controls and monitor and critique policies and
procedures with respect to accounting, administration, operations and the
safeguarding of assets;

4.2. review internal audit programs, satisfactory to test for non-compliance and
irregularities based on the internal auditor’s risk assessments;

45 4.3. report non-compliance and irregularities to the Audit Committee at least
quarterly and pursuant to such procedures as shall be set by the Audit Committee
and where exigent circumstances so dictate, to the CBK to the Board of Directors;

4.4. assist and cooperate with the external auditor in the performance of his or her
duties; and

4.5. perform such investigations and other duties as may be provided in the bank’s
by-laws or assigned to the internal auditor by the Board of Directors or the Audit
Committee.

Article 56
Publication of Financial Statements and Other Disclosure Requirements

1. Each bank shall within thirty (30) days of each calendar quarter, publish in a national
newspaper and on its website a true and fair summary of its quarterly balance sheet as at
the end of the previous calendar quarter. Each bank shall also, within four (4) months of
the end of its financial year, publish in a national newspaper and on its website a fair and
true summary of its balance sheet for the preceding financial year.

2. Within four (4) months of the end of its financial year, each bank shall also publish its
annual report, containing audited financial statements, and make copies available to the
public on request without charge. Each bank shall send copies of its annual report to the
CBK as soon as it becomes available and make it available on its website.

3. The CBK may prescribe by regulation further disclosure requirements for banks.

PART VIII
REPORTS AND EXAMINATION

Article 57
Reports and Examination

1. Each bank shall prepare and submit to the CBK reports concerning its large exposures,
administration and operations, liquidity, solvency, and profitability and such other
information as the CBK requires and those of its subsidiaries on an individual and a
consolidated basis. The reports shall be prepared in such form and detail and shall be
submitted at such intervals as shall be prescribed by the CBK.

46 2. Each bank and each of its affiliates shall be subject to examinations by the CBK and
by examiners appointed by the CBK. The examiners may visit banks at such reasonable
times as CBK deems appropriate and may take such action as deemed necessary and
advisable. Such examiners may include officials of the authority of another country that
is charged with the monetary or prudential supervision of financial activities in that
country if it concerns the examination of a bank that is a branch or affiliates of a foreign
bank that has its head office in that country or has a significant interest in a foreign bank
that is located in that country.

3. In their examinations of banks and their affiliates, the CBK and examiners appointed
by it may:

3.1. examine the accounts, books, documents and other records of the bank or
affiliates; and

3.2. require Directors and Senior Managers, employees and agents of the bank or
affiliates to provide all such information on any matter relating to its
administration and operations as they shall reasonably request.

4. Each bank and each of its affiliates shall admit and cooperate fully with the examiners
of the CBK and the examiners appointed by the CBK. No one shall attempt to harass,
hinder, delay, impede, intimidate or exert undue influence on an inspector of the CBK or
the examiners appointed by it.

5. Each affiliate of a bank and providers of professional or operations services to banks
shall provide information to the CBK as the CBK may reasonably request concerning the
bank’s operations and relations with such persons.

6. The CBK may require reports and conduct examinations as provided in this article of
any additional member of a banking group, if it deems it necessary for consolidated
supervision. Consolidated supervision includes without limitation an assessment of the
group’s organizational structure, management, risk management policies and internal
controls.

47
PART IX
ENFORCEMENT AND REMEDIAL MEASURES

Article 58
Enforcement and Remedial Measures

1. Under procedures established by regulation of the CBK, the CBK may take the
following actions, or impose the following penalties on the Directors and Senior
Managers, employees, principal shareholders, or those holding significant interests in a
bank, if it is determined that such person has violated a provision of this Law or of any
regulation or order of the CBK, has violated any condition or restriction attached to an
authorization issued by the CBK, or has engaged in unsafe or unsound practices in the
judgment of the CBK:

1.1. issue written warnings;

1.2. impose fines of up to ten thousand (10,000) Euros for each day that the
infraction continues provided that fines shall be of similar amount for entities with
comparable total assets for the same type of infraction;

1.3. dismiss or suspend the person from his or her position in the bank;

1.4. prohibit such person from serving in or engaging in banking or financial
business for a stated period or for life;

1.5. require the person to reimburse the bank for losses caused by such violations;

1.6. suspend the exercise of voting rights of shares in the bank;

1.7. require the person to dispose of all or any part of his or her direct or indirect
ownership interest in the bank or cease to hold a significant interest in it; and

1.8. prohibit the payment of capital distributions or dividends to such person;

1.9. conclude a written agreement with the Board of Directors proposing for a
program by remedial action.

2. Under procedures established by regulation of the CBK, the CBK may take the
following actions, or impose the following penalties on a bank, if it is determined that
such bank has violated a provision of this Law or of any regulation or order of the CBK,
has violated any condition or restriction attached to an authorization issued by the CBK
or has engaged in unsafe or unsound practices in the judgment of the CBK:

48 2.1. issue written warnings;

2.2. issue written orders to cease and desist from such infractions and to undertake
remedial action;

2.3. conclude a written agreement with the Board of Directors providing for a
program of remedial action;

2.4. impose fines of up to ten thousand (10,000) Euros for each day that the
infraction continues provided that fines shall be of similar amount for entities with
comparable total assets for the same type of infraction;

2.5. appoint an Official Administrator in accordance with Article 60 and Article 61
of this law; and

2.6. revoke the license of the bank.

3. Remedial actions required under paragraph 2. of this Article may include without
limitation one or more of the following actions:

3.1. require that the average total assets of the bank during any calendar quarter
not exceed its average total assets during the preceding calendar quarter or require
the bank to divest itself of specific assets or reduce its total assets;

3.2. require that the bank not acquire any equity interest in any legal entity,
establish or acquire any additional branch office, or engage in any new line of
business;

3.3. require that the bank not grant any exposure to an affiliate unless such
exposure is collateralized by marketable securities issued or guaranteed by a
government and denominated in Euro, held in custody by an escrow agent, whose
market value exceeds at all times one hundred and twenty five percent (125%) of
the amount of the exposure;

3.4. otherwise restrict or prohibit transactions with affiliates;

3.5. require that the interest rates the bank pays on deposits not exceed the
prevailing rates of interest on deposits of comparable amounts and maturities in
the region where the bank is located, as determined by the CBK;

3.6. require the bank or any of its subsidiaries to alter, reduce or terminate any
activity that the CBK determines has caused, or may cause, material losses to the
bank;

49 3.7. require the bank to dismiss one or more Directors or Senior Managers, as
determined by the CBK;

3.8. require that the bank divest itself of or liquidate any subsidiary;

3.9. restrict payment of bonuses or excessive compensation to any Director or
Senior Manager; and

3.10. restrict the payment of capital distributions or dividends.

4. The measures and penalties provided in this section shall not preclude application of
other civil penalties or criminal penalties as provided under applicable law.

5. Any fines or revenue imposed in accordance with this section shall be paid to the
Kosovo Consolidated Budget.

6. Any person who engages in unauthorized deposit-taking in contravention of Article 5
of this Law, notwithstanding any other provision of law, shall be subject to criminal
penalties. In addition, the CBK may impose fines of up to ten thousand (10,000) Euros
for each day that the infraction continues and be empowered to seek the liquidation of the
business of such person under the provisions of applicable law.

Article 59
Suspension and Removal of Persons Related to a Bank

1. If the CBK determines that any Senior Management, employee or holder of a
significant interest in a bank has willfully or repeatedly committed any violation of the
present regulation or any rule or order that has resulted in a material loss to the bank or
financial gain to such person or has engaged in unsafe or unsound practices and has
persisted in such violations or practices following a written warning from the CBK, the
CBK may issue an order containing any or all of the following provisions:

1.1. requiring the dismissal of the person from his or her position in the bank;

1.2. prohibiting such person from serving in or engaging in the banking or
financial business for a stated period or for life;

1.3. prohibiting the person from direct or indirect exercise of voting rights
attached to shares of the bank;

1.4. requiring the person to dispose of all or any part of his or her direct or indirect
ownership interest in the bank or cease to hold a significant interest in it; and

50 1.5. requiring the person to reimburse the bank for losses caused by such
violations.

2. If any such person is charged with any criminal offense, the CBK may issue an order
temporarily suspending such person from his or her position in the bank and, if
applicable, suspending the exercise of voting rights of shares in the bank by such person
pending the determination of the criminal case. A dismissal of the criminal case or
decision of not guilty on the merits shall not preclude the CBK from taking any
enforcement action with respect to a person that is authorized by this Law.

PART X
OFFICIAL ADMINISTRATION

Article 60
Grounds for Appointing an Official Administrator

1. The CBK may appoint an Official Administrator for a bank if:

1.1. the CBK determines that the bank has violated any provision of law or
regulation, or has engaged in any unsafe and unsound practices, in such a manner
as to weaken the bank’s condition, seriously jeopardize depositors’ interests, or
dissipate the bank’s assets;

1.2. the CBK has reasonable cause to believe that the bank or its Senior Managers
or Directors have engaged or are engaging in criminal activities punishable by
imprisonment of one year or more, in such a manner to jeopardize depositors’
interests;

1.3. the CBK determines that the bank is an unsafe or unsound condition to
transact business and the bank or its Senior Managers and Directors are unable to
promptly improve such condition;

1.4. the bank fails in any manner to cooperate with the CBK, or its examiners and
to enable the CBK to perform its supervisory responsibilities, including through
concealment or failure to submit for inspection any of the bank’s books, papers or
records;

1.5. the bank or its Senior Managers, Directors, employees or principal
shareholders fail to comply with an order of the CBK under Article 58 of this law;

51 1.6. the bank, by resolution of its directors or shareholders, requests the
appointment of an Official Administrator;

1.7. the bank’s regulatory capital level falls below fifty percent (50%) of the
minimum regulatory capital required pursuant to Article 16 of this law; or

1.8. the CBK considers that another bank or any shareholder that holds a
significant interest in the bank faces a risk of becoming insolvent or fails to meet
regulatory requirements regarding capital or liquidity by the Home Country
Supervisor or in the home of its corporate headquarters.

2. The decision by the CBK to appoint an Official Administrator shall specify the
grounds upon which it is adopted. Such decision shall be promptly notified to the bank
subject to official administration and recorded in the register kept pursuant to Article 4 of
this Law.

Article 61
Appointment and Removal of the Official Administrator

1. The Official Administrator shall be appointed by the CBK for a term, not exceeding
six (6) months, as specified in the decision by the CBK. The term of appointment may be
extended by the CBK only twice, for a period not exceeding, in each case, three (3)
months. If the Official Administrator has not resolved the issues for which it was
appointed to resolve after a period of twelve (12) months, the liquidation process of the
bank will commence.

2. If the circumstances for which the appointment of an official administrator are not
resolved after a period of twelve (12) months, the bank’s license shall be revoked and the
receivership and liquidation process in accordance with Part XI shall commence.

3. The Official Administrator may be a person from the private sector or an official of the
CBK who meets the qualifications prescribed by the CBK.

4. The CBK shall provide written notice to the bank of the appointment of the Official
Administrator.

5. The decision of the CBK appointing an Official Administrator for a bank shall be
effective at the time specified in the decision or, if no time is specified, at the time notice
is given under paragraph 3. of this Article.

6. As of the effective time of the appointment, all powers, functions and responsibilities
of the bank’s shareholders and Directors or Senior Managers shall be vested in the
Official Administrator, unless the Official Administrator requests the shareholders or

52 Directors or Senior Managers to carry out any activity provided under this law. Any
actions or decisions taken by or on behalf of the bank subject to official administration
shall be null and void, unless they are taken by or under the authority of the Official
Administrator.

7. The CBK may remove the Official Administrator before the end of the term specified
in paragraph 1. above and appoint a qualified replacement. The CBK must ensure that
the bank at all times remains under the control of a duly appointed Official
Administrator.

8. The provisions in Article 33 of this law shall apply to an Official Administrator except
that any obligation to report to the Board of Directors shall represent an obligation to
report to the CBK. Any transaction involving the bank in official administration in which
the Official Administrator has a material interest or relationship in the matter may be
engaged in only with the prior approval of the CBK. If an Official Administrator fails to
disclose a material interest or relationship as required, the contract may be set aside and
the CBK shall remove the Official Administrator.

Article 62
Powers and Duties of the Official Administrator

1. The Official Administrator shall have full and exclusive powers to manage and operate
the bank. The Official Administrator may take any action as necessary or appropriate to
carry on the business of the bank and preserve and safeguard its assets and property or to
implement a plan of action with respect to the bank that has been approved by the CBK.

2. The Official Administrator shall act in accordance with the regulations, instructions
and guidelines given by the CBK at any time in the course of the official administration,
and shall be accountable only to the CBK for the performance of duties and the exercise
of powers as Official Administrator. The Official Administrator may delegate any of
such powers or duties to other persons, in accordance with the instructions issued by the
CBK.

3. The Official Administrator shall suspend the payment of any dividends or other form
of capital distribution to shareholders, as well as any payment to directors other than for
services provided to the bank upon request of the Official Administrator.

4. The Official Administrator may employ, at the expense of the bank in Official
Administration, independent attorneys, accountants and consultants to assist the Official
Administrator, on such terms as the CBK shall approve.

5. If the Official Administrator has reasonable cause to believe that shareholders,
directors, officers, attorneys, accountants or other professionals have engaged or are
engaging in criminal activities punishable by imprisonment of one year or more or in

53 fraudulent activities, it shall immediately notify the CBK and shall pursue civil actions
seeking damages and restitution.

Article 63
Moratorium and Effect of Official Administration on Proceedings and Contracts

1. The CBK may, on the written request of the Official Administrator, impose a
moratorium suspending some or all payments by a bank in Official Administration.

2. Without the consent of the CBK:

2.1. one person may not begin or continue a proceeding in a court against a bank
in Official Administration, and

2.2. one person may not exercise rights under a mortgage, charge, or other
security over the property of a bank in Official Administration, or issue any
execution, attach any debt, or otherwise enforce or seek to enforce any judgment
or order obtained in respect of a bank in Official Administration.

3. CBK may by written consent waive the application of paragraphs 2.1 and 2.2 of this
Article to any creditor or class of creditors.

4. No right or obligation under any contract to which the bank in Official Administration
is a party may be terminated, accelerated, or modified solely because of the appointment
of the Official Administrator or any action taken by the Official Administrator.

5. The Official Administrator may request the CBK to issue an Order to all banks
ordering all banks to immediately cease granting credit to any of the defaulting debtors of
the bank under Official Administration and their related entities, which order will remain
in effect until such time as the defaulting debtors enter into an agreement with the
Official Administrator to pay the debt service on loans at the bank under Official
Administration. In determining whether to issue such an order the CBK may consider the
defaulting debtor’s financial condition and the likely impact of the order on third parties.

Article 64
Taking Control of the Bank

1. Immediately upon appointment, the Official Administrator shall secure the properties,
offices, assets, books and records of the bank, and may take all necessary or appropriate
steps aimed at such purpose, including without limitation:

1.1. changing the locks for external access to the bank’s buildings and offices;

54 1.2. changing the passwords to the bank’s computers and granting access only to a
limited number of employees;

1.3. issuing to authorized employees new type of entrance passes to the bank’s
premises and controlling the access of other employees to those premises.

2. In the course of the official administration, the Official Administrator shall have
unrestricted access to, and control over, the properties, offices, assets and the books of
account and other records of the bank subject to official administration.

3. Immediately upon request of the Official Administrator, law enforcement officials
shall, if necessary by use of force, assist the Official Administrator to gain access to any
premises of the bank and to gain control over and to secure such properties, offices,
assets, books and records. The decision of the CBK appointing the Official Administrator
shall have the legal force and effect of an enforceable court order requiring law
enforcement authorities to provide such assistance.

4. Directors, officers and employees of the bank shall make available to the Official
Administrator all records and documentation pertaining to the bank and any additional
information or report requested by the Official Administrator.

Article 65
Inventory and Plan of Action

1. Not later than thirty (30) days after the appointment, the Official Administrator shall
prepare and deliver to the CBK an inventory of the bank’s assets and liabilities. Such
report will itemize the assets according to their different risk profiles and classify the
non-performing loans.

2. Not later than sixty (60) days after the appointment, the Official Administrator shall
prepare and deliver to the CBK a report on the financial condition and future prospects of
the bank subject to official administration.

3. In the report referred under paragraph 2. of this Article, the Official Administrator
shall propose a plan of action which, as appropriate, shall recommend returning the bank
to compliance with the law by carrying out a plan of corrective actions that may include a
capital increase; or, if the bank cannot be rehabilitated, any other course of action
designed to minimize disruption to depositors and preserve the stability of the banking
sector. The Official Administrator shall promptly provide any additional report or
information requested by the CBK.

55 Article 66
Capital Increase by Existing Shareholders

1. On the basis of the report produced under Article 65 of this law and with the approval
of the CBK, the official administrator may take the following actions to increase the
bank’s capital through the issuance of new shares:

1.1. determine the extent of losses and prepare the bank’s balance sheet covering
the amount of such losses through the bank’s profits, reserves and, if necessary,
capital; and

1.2. notify existing shareholders of the amount of additional capital needed to
bring the bank’s capital into compliance with all capital requirements and allow
such shareholders to subscribe and purchase additional shares, by submitting
binding commitments equal to the full amount of additional capital needed within
three business days of such notification.

2. Existing shareholders of a bank in official administration shall have no preemptive or
other rights to purchase additional shares issued except as provided in this Article.

Article 67
Recapitalization by New Shareholders

1. On the basis of the report produced under Article 65 of this law and with the approval
of the CBK, the Official Administrator may take the following actions to increase the
bank’s capital through the issuance of shares to new shareholders in the following
circumstances:

1.1. in the event that binding commitments are not submitted in an amount equal
to the full amount of additional capital needed by existing shareholders; or

1.2. without offering shares to existing shareholders, if the Central Bank
determines that:

1.2.1. an expedited resolution of a bank to maintain financial stability is
necessary, or

1.2.2. the existing shareholders are no longer suitable to maintain a
significant capital position in the bank; or

1.2.3. there has been a failure to comply timely with a remedial measure
under Article 66 of this law requiring an increase in the bank’s capital.

2. To carry out a recapitalization by new shareholders, the Official Administrator shall:

56 2.1. if not already carried out in accordance with Article 66 of this law, determine
the extent of losses and prepare the bank’s balance sheet covering the amount of
such losses through the bank’s profits, reserves and, if necessary, capital;

2.2. if necessary to reflect losses, reduce the par value of outstanding shares,
notwithstanding any other provision of law;

2.3. determine the amount and type of funding needed to bring the bank into
compliance with all capital requirements;

2.4. cause the bank to issue additional shares in the amount necessary and carry
out the sale of shares by the bank and purchase of such shares by new investors.

3. Notwithstanding any law that may come into effect to regulate the securities market
and other disclosures by issuers of securities, the competent authority under that law shall
take the necessary action to permit any such issuance within three (3) business days.

Article 68
Mergers, Sales and Other Restructurings

1. On the basis of the report produced under Article 65 of this law and with the approval
of the CBK, the Official Administrator may carry out a merger of the bank or a transfer,
in whole or in part, of the bank’s assets and liabilities.

2. A transfer of the bank’s assets and liabilities may include a transfer to a bridge bank,
which is a bank established by the Government or the CBK for a temporary period for the
purpose of resolving the failing bank.

3. In accordance with the instructions given by the CBK, the Official Administrator may
approve a restructuring of the bank’s liabilities through arrangements with the bank’s
creditors, including a reduction, modification, rescheduling and novation of their claims.

4. If the liabilities of the bank under official administration that are transferred to another
bank includes a transfer of insured deposits, and only if the value of payment is less than
the amount of transferred insured deposits, the difference up to the amount of insured
deposits shall be paid by the Deposit Insurance Fund of Kosovo to other bank in
accordance with the law governing the deposit insurance system. After such transfer of
liabilities of the bank and the use of deposit insurance funds, the license of the bank
under official administration shall be revoked, the bank shall be placed in receivership,
and the bank shall be liquidated in accordance with the provisions of Part XI.

57 Article 69
Expenses of the Official Administration

The Official Administrator shall receive a remuneration determined by the CBK. All
costs and expenses incurred on account of the official administration shall be borne by
and charged to the bank subject to such proceeding.

Article 70
Termination of Official Administration

1. The official administration shall terminate at the expiry of the term specified in the
decision appointing the Official Administrator or any extension of the term of such
appointment as provided in Article 61 of this Law.

2. Official administration shall be terminated prior to the expiry of the term identified
above if the CBK determines that:

2.1. official administration is no longer necessary because grounds for
appointment of the Official Administrator have been remedied; or

2.2. the bank cannot be rehabilitated and the CBK issues a decision to revoke the
bank’s license under Article 14 of this law and to commence a liquidation
proceeding under the provisions of Article 71 of this Law.

3. In the case of a termination of official administration that does not involve a closure of
the bank, the Official Administrator shall carry out the duties of the bank’s Directors or
Senior Managers until nomination and/or election of Directors or Senior Managers.
Upon nomination and/or election of Directors or Senior Managers, the Official
Administrator shall return control of the bank and its properties, offices, assets, books and
records to the competent bodies.

4. The decision of the CBK to terminate official administration shall be accompanied by
a recommendation by the Official Administrator and a detailed report prepared by the
Official Administrator supporting the recommendation.

5. Within five (5) days of the termination of the appointment, the Official Administrator
shall prepare and submit to the CBK a final report and accounting of the official
administration.

58
PART XI
RECEIVERSHIP AND LIQUIDATION

Article 71
Bases for Initiation of Receivership

1. In the event of the revocation of a bank’s license pursuant to Article 14, other than
revocation under paragraph 1.1 Article 14 of this law, the CBK shall simultaneously take
possession and control of that bank through a receiver appointed by the CBK. This
proceeding shall be known as Receivership.

2. A receiver may be a person from the private sector or an official of the CBK who
meets the qualifications prescribed by the CBK. The CBK may dismiss a receiver. The
terms of the receiver’s compensation shall be set by the CBK and may include incentives
for meeting the objectives set by the CBK and may include penalties for failure to meet
such objectives.

3. The compensation of the receiver and experts that he or she engages, reimbursement of
their expenses and expenses of the CBK in execution of the present regulation with
respect to a bank shall be paid from the assets of the bank. Payments to the receiver shall
be made on a current basis if in the judgment of the receiver there are sufficient liquid
assets. Any moneys owing to the receiver at the end of the term of receivership shall be
paid from the proceeds from the sales of the bank’s assets with the priority described in
Article 75 of this Law.

Article 72
Notice and Registration of Receivership

1. The decision of the CBK appointing a receiver for a bank shall be effective as of the
date of its issuance, unless such decision provides otherwise. The receiver shall
immediately post in each office of the bank a notice announcing the revocation of the
license and appointment by the CBK, specifying the effective date and time of possession
by the receiver and specifying that:

1.1. authorizations of persons to engage the financial responsibility of the bank
have been cancelled;

1.2. persons who previously had authorization to give instructions on behalf of the
bank with respect to payment or transfer of the bank’s assets or assets managed by
the bank are no longer so authorized; and

1.3. the bank’s license has been revoked.

59 2. The receiver shall publish a notice specifying the actions taken in one or more
newspapers of general circulation in the communities in which the bank maintains offices
and arrange for the publication of such notice each week for the next four (4) weeks and
shall inform as necessary the competent authorities and shall transmit copies of such
actions to the CBK within two (2) days of such action.

Article 73
Powers and Duties of Receiver and Effects of Receivership

1. Upon appointment the receiver shall become the sole legal representative of the bank,
and shall succeed to all rights and powers of the shareholders and of the Directors or
Senior Managers of the bank. Such rights and powers shall include holding title to the
books, records, and assets of the bank; managing, operating and representing the bank;
marshalling assets and claims; transferring or disposing of assets; and taking any other
action necessary for the efficient liquidation of the bank and to obtain the maximum
amount from the sale of assets, including without limitation:

1.1. continuing or interrupting any operation of the bank;

1.2. borrowing money guaranteed with its assets or without guaranty;

1.3. suspending or limiting the payment of debts subject to the approval of the
CBK as provided below;

1.4. hiring specialists, experts or professional consultants;

1.5. administering the bank’s accounts;

1.6. collecting the debts due to the bank and recovering goods owed by the third
parties;

1.7. initiating or defending the bank in any legal proceeding and executing any
relevant instrument in the name of the bank; and

1.8. restructuring the bank’s liabilities through arrangements with the bank’s
creditors, including through a reduction, modification, rescheduling and novation
of their claims, up to the amount determined by the CBK.

2. The receiver shall act in accordance with the regulations and guidelines given by the
CBK at any time in the course of the liquidation, and shall be accountable only to the
CBK for the performance of duties and the exercise of powers as receiver.

60 3. A receiver may not take any new deposits. A receiver may extend credit only to an
existing customer in accordance with the terms of an agreement in force at the time of the
appointment of the receiver.

4. A receiver may continue any operations except as prevented under paragraph 3. of this
Article and may borrow money on a secured or unsecured basis. The receiver may stop or
limit the payment of any obligation, employ or dismiss any officer, employee or advisor,
execute any instrument in the name of the bank and initiate or defend and conduct in the
bank’s name any action or legal proceeding.

5. The receiver shall have unrestricted access to and control over the offices, books of
account and other records, and other assets of the bank and its subsidiaries. At the request
of the receiver, a law enforcement officer or officers shall assist the receiver to gain
access to bank premises or control over bank records.

6. Any person who willfully interferes with a receiver’s access to or control over the
offices, books of account and other records, and other assets of a bank for which he or
she has been appointed shall be imprisoned for a period of not less than one year nor
more than five years or fined in an amount of not less than one thousand (1,000) Euros
per day nor more than five thousand (5,000) Euros per day for each day that the
infraction continues, or both.

7. The CBK shall approve or deny a merger of the bank with another bank, or sale of
substantially all the bank’s assets to any one bank, based upon the criteria in Article 39 of
this law on mergers.

8. The receiver shall have the same rights and privileges and be subject to the same
duties, penalties, conditions and limitations as apply to Directors, Senior Managers or
other employees of a bank licensed under this Law.

9. The powers of the Directors or Senior Managers and shareholders of the bank shall be
terminated during a receivership; provided, however, that Directors or Senior Managers
may be instructed by the receiver to exercise specified functions for the bank; and further
provided, that such persons shall be subject to dismissal by the receiver from their
positions at the bank and shall thereupon cease to receive compensation from the bank.

10. The receiver shall secure the property, offices, books, records, and assets of the bank
to seek to prevent their dissipation by theft or other improper action, by taking actions
including, but not limited to, the following:

10.1. changing the locks and limiting access to the new keys on external entrances
to the bank’s offices and on doors to internal offices which contain financial assets
or information or equipment which could enable a person to gain unlawful access
to financial assets;

61 10.2. changing or establishing access codes to the bank’s computers and granting
access only to a limited number of trustworthy employees;

10.3. issuing new photo identification passes for entrance of authorized
employees to the bank’s premises and controlling the access of others to the bank’s
premises;

10.4. canceling authorizations of persons to engage the financial responsibility of
the bank and issuing new authorizations, as appropriate and notifying third
parties;

10.5. informing correspondent banks, registrars and transfer agents of securities,
and external asset managers of the bank’s assets that persons who previously had
authorization to give instructions on behalf of the bank with respect to dealing in
the bank’s assets or assets held in trust by the bank are no longer so authorized
and that only the receiver, and persons authorized by the receiver have such
authority; and

10.6. suspending the payment of capital distributions in general and payment of
any kind to directors, Senior Managers and principal shareholders; provided,
however, that reasonable compensation may be paid to directors and Senior
Managers and other staff of the bank for services rendered to the bank at the
request of the receiver.

11. The receiver shall establish a new balance sheet for the bank, based on his or her
determination of liquidation values of the bank’s assets with a corresponding reduction in
the value of the bank’s liabilities in the reverse order of priority in payment of
distributions in a liquidation of a bank’s assets. Liabilities shall be deemed due and
payable and interest shall cease to accrue as of the date of the appointment of the
receiver. Un-matured liabilities shall be discounted to present value at the rate of interest
determined by the CBK.

12. Within one (1) month of taking possession of a bank, the receiver shall make an
inventory of the assets and property of the bank and transmit a copy thereof to the CBK,
which shall make a copy available for examination by the public.

13. Within thirty (30) days from the date of appointment, the receiver can repudiate any
unfulfilled or partially fulfilled contract, to the extent that the fulfillment of such contract
is determined to be burdensome for the bank and the repudiation would promote the
orderly administration of the bank’s affairs and protects depositors’ interest. Any liability
arising from the repudiation shall be determined as of the date of repudiation and shall be
limited to actual direct damages incurred and shall not include any damage for lost profits
or opportunity or non-monetary damages. In case of repudiation of a lease contract of
immovable and movable property, the owner shall be given a thirty (30) days notice.

62 14. As soon as possible from the date of appointment, the receiver may make available
for withdrawal by depositors or payment to other creditors such amounts as in his or her
opinion may appropriately be used for that purpose; provided, however, that all
depositors or other creditors who are similarly situated shall be treated in the same
manner.

15. When a receiver has taken possession of a bank:

15.1. any term, statutory, contractual or otherwise, on the expiration of which a
claim or right of the bank would expire or be extinguished, shall be suspended;

15.1.1. the calculation of interests and penalties against bank’s obligations
shall be suspended and no other charge or liability shall accrue on the
obligations of the bank;

15.1.2. all legal proceedings against the bank are stayed and the exercise
of any right on the bank’s assets shall be suspended. No right can be
exerted over assets during the bank’s liquidation, except rights given to
receiver, and no creditor may attach, sell or take possession of any assets
of the bank as a means of enforcing his claim or initiate or continue any
legal proceeding to recover the debt or perfect security interests in the
bank’s assets.

15.2. any attachment or security interest except one existing six months prior to
the effective date of the receivership shall be vacated, and no attachment or
security interest, except one created by the receiver in the application of this
section shall attach to any of the assets or property of the bank so long as such
receivership continues;

15.3. shareholders’ rights shall be extinguished except for the right to receive
proceeds, if any, under Article 75 of this law; and

15.4. the receiver may sell the assets of the bank or arrange for the assumption of
liabilities of the bank on terms he or she considers fair.

16. If the receiver has reasonable cause to believe that shareholders, directors, officers,
attorneys, accountants or other professionals have engaged or are engaging in criminal or
fraudulent activities, he or she and shall pursue civil actions seeking damages and
restitution.

17. The procedures for determinations of the validity of claims and for liquidation of
bank assets and return of bank customers’ property shall be prescribed by the CBK;
provided, however, that the sale of bank assets shall be accomplished in a transparent and
commercially reasonable manner.

63 18. Any assets of the bank that have not been sold at the end of the term of the
receivership may be abandoned by the receiver or given to a charitable institution that
promotes public health or education. Creditors of the bank shall have no claim against
any such assets.

19. The receiver shall report each month to the CBK on the progress of the receivership
in such form as may be prescribed by the CBK and provide any other information upon
request of the CBK.

20. The receiver shall, upon the prior written approval of the CBK and according to its
guidelines, pursue the following activities:

20.1. dispose of a bank’s assets and liabilities through a purchase and assumption
transaction; or

20.2. organize a restructuring of the bank’s assets and liabilities or continue viable
or necessary operations through a bridge bank.

21. For purposes of paragraph 20. of this Article, a bridge bank is a bank established by
the government or the CBK for a temporary period for the purpose of resolving a failed
bank.

22. If the liabilities of the bank transferred to another bank immediately after revoking
the license of bank in accordance with the provisions of paragraph 20.1 of this Article,
that also includes transfer of insured deposits, and only if the value of payment is less
than the amount of transferred insured deposits, the difference up to the amount of the
insured deposits transferred to another bank shall be paid by the Deposit Insurance Fund
of Kosovo in accordance with the law governing the deposit insurance system.

Article 74
Avoidance of Pre-Receivership Transfers

1. The receiver may set aside a transaction based on a forged or fraudulent document that
the bank has executed to the detriment of creditors within five (5) years prior to the
effective date of the receivership.

2. The receiver may bring an action in court to set aside the following transactions
affecting the assets of the bank or to recover from third parties the transfers by the bank:

2.1. gratuitous transfers to, or to persons related to, Directors or Senior Managers
and principal shareholders of or holders of significant interests in the bank made
within five (5) years prior to the effective date of the receivership;

64 2.2. gratuitous transfers to third parties made within three (3) years prior to the
effective date of the receivership;

2.3. transactions in which the consideration given by the bank considerably
exceeded the received consideration, made within three (3) years prior to the
effective date of the receivership;

2.4. any act done with the intention of all parties involved to withhold assets from
bank creditors, or otherwise impair their rights, within five (5) years prior to the
effective date of the receivership; and

2.5. transfers of property of the bank to, or for the benefit of, a creditor on account
of a debt incurred within six (6) months prior to the effective date of the
receivership which has the effect of increasing the amount that the creditor would
receive in a liquidation of the bank; provided, however, that payment of deposits
in an amount not exceeding two thousands (2000) Euros per depositor shall not be
subject to this provision.

3. Transactions with persons related to the bank conducted within one (1) year prior to
the effective date of the receivership, if detrimental to the interest of depositors and other
creditors, may be set aside and recovered from such persons.

4. An action to set aside a transfer may be brought by the receiver within one (1) year
following the effective date of the receivership.

5. Notwithstanding the foregoing paragraphs, the receiver may not set aside a payment or
transfer by the bank if it was made in the ordinary course of the bank’s business, or if it
was part of a contemporaneous exchange for reasonably equivalent value, or to the extent
that following the transfer the recipient extended a new unsecured credit to the bank
which had not been satisfied by the bank as of the effective date of the receivership.

6. The receiver may recover property or the value of property transferred by the bank
from a transferee of an initial transferee only if the second transferee did not give fair
value for the property and knew that the initial transfer could be set aside under the
present regulation.

7. The receiver may order that notice of the filing of a legal action to set aside a transfer
be recorded in the public records for real estate ownership and any other rights in
property and a person taking title to or acquiring any security interest or other interest in
such property after the filing of such a notice takes his or her title or interest subject to the
rights of the bank to recover the property.

8. A lessor of bank premises or a utility company or other provider of utility services
including, without limitation, a company that supplies electricity, natural gas, water or
telephone services, may not alter, refuse or discontinue such services to a bank because of

65 its receivership or because the debtor has failed to pay for services prior to its
receivership; provided, however, that upon request of a lessor of bank premises or a
utility company, the bank shall place a security deposit in a commercial bank as a
condition to the lessor’s or utility company’s duty to continue to provide services during
the receivership, and any such deposit shall not be required in an amount greater than the
cost of services provided to the bank during the month immediately prior to the effective
date of the receivership.

9. Notwithstanding the foregoing:

9.1. irrevocable money and securities transfer orders entered by a bank into a
payment or securities settlement system recognized as such by the CBK shall be
legally enforceable and binding on third parties, even upon a decision revoking
the bank’s license and appointing a receiver, but only if the transfer orders
become irrevocable before such decision takes effect; or

9.2. where a bank has given irrevocable money or securities transfer orders
through a payment or securities settlement system after the decision revoking the
bank’s license and appointing a receiver takes effect on the day such decision was
taken, the transfer orders shall be legally enforceable and binding on third parties,
unless the receiver proves that the system operator was aware of the decision
before the transfer orders became irrevocable.

10. No law, regulation nor practice on the setting aside of contracts and transactions
issued or adopted before the decision revoking the bank’s license and appointing a
receiver takes effect shall lead to the unwinding of a netting by a payment or securities
settlement system recognized as such by the CBK because of that decision.

11. For the purposes of paragraph 9. and 10. of this Article:

11.1. a transfer order entered into a payment or securities settlement system
becomes irrevocable at the time defined by the regulations of that system; and

11.2.“Netting” means the conversion into one net claim or one net obligation of
claims and obligations resulting from transfer orders which a participant or
participants in a settlement system either issue to, or receive from, one or more
other participants in that system with the result that only a net claim or a net
obligation remains.

12. Nothing in this law and no decision made under this law shall prevent or prohibit the
set off by operation of law of obligations between a bank being subject to the liquidation
proceeding under this Chapter and its counterparties.

13. In determining the rights and obligations between the bank and its contractual
counterparties, effect shall be given to the termination provisions of eligible financial

66 contracts between them. The net termination value determined in accordance with an
eligible financial contract between them shall be a claim of the bank on the counterparty
or shall be admitted after its validation as a claim of the counterparty on the bank. For
the purposes of this paragraph:

13.1. “eligible financial contract” means any of the following agreements:

13.1.1. currency or interest rate swap agreement;

13.1.2. a basis swap agreement;

13.1.3. a swap spot, future, forward or other currency exchange
agreement;

13.1.4. an agreement providing the collar or floor transaction;

13.1.5. a commodity swap agreement;

13.1.6. an interest rate valid agreement;

13.1.7. a repurchase or reverse repurchase agreement;

13.1.8. a spot, future, forward or other commodity agreement;

13.1.9. an agreement to buy, sell, borrow or lend securities, to clear or
settle securities transactions or to act as a depository for securities;

13.1.10. any derivative or option agreement;

13.1.11. any main agreement- master agreement;

13.1.12. a guarantee of the liabilities under a written agreement; and

13.1.13. any agreement of a kind prescribed by regulation of the CBK.

13.2. “net termination value” means the net amount obtained after setting off the
mutual obligations between the parties to an eligible financial contract in
accordance with its provisions.

14. Except as provided under this paragraph and subject also to paragraph 15 in this
Article, no set off shall be allowed with respect to claims acquired towards the bank after
the decision on the revocation of the license and the appointment of a receiver takes
effect or within three (3) months before such decision.

15. Claims towards the bank arising from deposits shall be set-off against any sum due by
a bank to a depositor as of the date on which the license is revoked and the receiver is

67 appointed, (i) automatically, if such sum is matured or past due, (ii) if the depositor elects
so, if the sum is not matured or past due.

Article 75
Priorities in Payment of Claims

1. In any liquidation of a bank’s assets, allowed secured claims shall be paid to the extent
of the realization of the security or the security shall be delivered to the secured creditor.
Other allowed claims shall be paid in relation to all other debts, in the order described
below:

1.1. credits extended to the bank by the CBK until the appointment of the
receiver;

1.2. credits extended to the bank prior to the appointment of the receiver and
under collateral whose object are the bank’s assets and to the extent of such
collateral;

1.3. necessary and reasonable expenses incurred by the receiver and the CBK,
including professional fees, in application of the provisions of the receivership
sections hereof;

1.4. claims from Deposits Insurance Fund of Kosovo to the insured depositors;

1.5. credits extended to the bank after the appointment of the receiver;

1.6. uninsured deposits; and

1.7. unsecured Credits extended to the bank prior to the appointment of the
receiver;

1.8. subordinated debt.

2. If the amount available for payment for any class of claims is insufficient to provide
payment in full, such claims shall be reduced in equal proportions.

3. After payment of all claims filed, any remaining allowable claims that were not filed
within the time specified by rule for the filing shall not be paid. Any proceeds remaining
after all claims of depositors and other creditors have been paid shall be distributed
among the shareholders of the bank in accordance with their rights.

68 Article 76
Final Reporting to the CBK

Once the proceeds for the sale of assets of a bank have been distributed, the receiver shall
provide a report to the CBK that includes a statement of income and expense and sources
and uses of funds during the period of receivership. Upon approval by the CBK of the
report, the CBK receivership shall be terminated and the CBK and the receiver shall be
relieved of any further responsibility in connection with the receivership of a bank.

Article 77
Miscellaneous Receivership Provisions

1. Professional employees appointed to represent or assist a receiver or the CBK in
connection with a receivership shall not be paid amounts greater than are payable to
employees or agents of banks for similar services, except that the CBK may authorize
payment at higher rates, if the CBK determines that paying such higher rates is necessary
in order to recruit and retain necessary personnel.

2. The CBK shall have authority to indemnify a receiver and his or her agents for their
actions on such terms as the CBK deems proper.

Article 78
Voluntary Liquidation

In the event that a bank, by resolution of its shareholders, requests that its license be
revoked under the provisions of this law and the CBK, further to a plan presented to it,
determines that the bank has enough assets to satisfy its liabilities, the liquidation shall be
carried out immediately and all depositors paid within five days by the bank, in
compliance with the procedures to be issued by the CBK and under the supervision of the
latter. Notwithstanding the above, if the CBK determines, including in the course of such
liquidation, that the bank does not ensure an orderly liquidation or it fails to comply with
this law or with any instructions issued by the CBK, provisions of part XI of this chapter
shall apply for the appointment of receivers.

69
PART XII
MISCELLANEOUS PROVISIONS

Article 79
Cooperation with Other Supervisors

1. The CBK may exchange information on supervisory matters with financial supervisory
authorities in Kosovo and in other countries. The exchange of such information may
include confidential information, provided that the CBK has satisfied itself that the
information will be used for supervisory purposes and will be subject to confidential
treatment that is similar to that which the CBK would be required to apply.

2. To facilitate fulfillment of supervisory responsibilities, the CBK may enter into a
memorandum of understanding with another financial supervisory authority regarding
mutual assistance and cooperation, which may cover any matters agreed to between the
CBK and the other financial supervisory authority regarding information-sharing and
other forms of cooperation and assistance.

Article 80
Secrecy

1. Present and past Directors and Senior Managers, employees, and agents of a bank shall
keep secret, and not use for personal gain or gain by other than the bank that they serve or
have served, or permit to be examined by others, any non-public information that they
obtained in the course of their services to the bank. Such information may be disclosed
only to the CBK, including its inspectors and the examiners appointed by it, to external
auditors of the bank, to judicial authorities acting upon the order of the court in criminal
cases, as the law shall provide, to foreign bank supervisory authorities, and when the
protection of the bank’s own interest in legal proceedings requires disclosure.

2. Any non-public information collected by the CBK from a bank and any non-public
information provided to the CBK by any other regulatory or supervisory authority to
carry out CBK responsibilities under this Law shall be subject to the requirements of the
Central Bank Act and may only be disclosed outside the Central Bank as provided in that
Law.

Article 81
Authority to Require Information from Third Parties

1. Where there is reasonable cause to suspect a violation of this Law or any regulations
has occurred or is occurring, the CBK may require any person to produce the information
required for the clarification of the situation, and may also carry out verifications on the
spot on which such violation appears to have occurred or is apparently occurring, or

70 where it suspects that elements may be found which will shed light on the suspected
violation.

2. In the course of an inquiry under paragraph 1. of this Article where the suspected
violation is conduct of unlicensed banking activity or deposit-taking, the CBK may seize
any documents or valuables which may constitute the object, instrument or proceeds of
an infraction or which prove to be necessary for the inquiry.

3. The police shall provide whatever assistance the CBK requests in carrying out an
inquiry under this Article.

Article 82
Civil Penalties

1. Major violations by banks: A fine from fifty thousands (50,000) to one million
(1,000,000) Euros shall be imposed on a bank for the following violations:

1.1. failure to maintain the regulatory capital and capital requirements in
accordance with Article 15 and Article 16 of this law;

1.2. distribution of profits or dividends contrary to the prohibition from Article 18
of this law;

1.3. failure to maintain the liquidity requirements in accordance with Article 19 of
this law;

1.4. failure to organize an internal auditing in accordance with Article 32 of this
law;

1.5. failure of the internal audit department to draw up internal audit reports or its
failure to draw up such reports pursuant to Article 32 of this law;

1.6. acquisition of shares or holdings from another legal person in contravention
of Article 37 of this law;

1.7. performance of activities other than banking services, additional financial
services or any banking services without prior authorization of CBK in
accordance with Article 44 of this law;

1.8. failure to maintain maximum limits on large exposures in accordance with
Article 46 of this law;

1.9. enter into transaction with Related Individuals in contravention of Article 47
of this law;

71 1.10. failure to maintain and develop internal policies and procedures in
accordance with Article 49 of this law;

1.11. failure to prepare and maintain the written records in accordance with
Article 51 of this law;

1.12. keeping of accounts and records and prepare the financial statements in
contravention of Article 53 of this law;

1.13. failure to publish the financial statements and audited annual report within
four (4) months after the end of its financial year in accordance with Article 56 of
this law;

1.14. failure to report to the CBK pursuant to Article 57 of this law;

1.15. failure to cooperate fully with examiners of the CBK in accordance with
Article 57.4 of this law.

2. Violations by Senior Management or Member of Board of Directors: A fine of one
thousand (1,000) Euros to fifty thousand (50,000) Euros shall be imposed for the
following violations:

2.1. failure to ensure that the bank operates in accordance with rules and
regulations of CBK;

2.2. failure to comply with his duties from Article 28 and 30 of this law;

2.3. failure to comply with Article 28 of this law;

3. Violations by auditing firms and certified auditors: A fine from one thousands (1,000)
to fifty thousand (50,000) Euros shall be imposed on the auditing firm for the following
violations:

3.1. failure to perform an audit or prepare an auditor’s report within time frame
according to Article 54 of this law;

3.2. failure to notify the Board of Directors forthwith of the facts or circumstances
from paragraph 1, sub-paragraph 1.3 Article 54 of this law.

Article 83
Prevention of Money Laundering

1. No bank or financial institution shall conceal, convert, or transfer cash or other
property, if it knew or ought to have known that such cash or other property is derived

72 from criminal activity, or aid or abet any person in concealing or disguising the illicit
origin of any cash or property.

2. Banks and financial institutions shall comply with the Law on The Prevention of
Money Laundering and Financing of Terrorism. Central Bank of Kosovo and Finance
Intelligence Unit shall keep cooperate relations in accordance with Laws into force.

Article 84
Criminal Penalties

1. A person who conducts the business of banking without obtaining a banking license
within this Law is guilty of an offence and upon conviction may be subject to
imprisonment for up to three (3) years, a fine of up to ten thousand (10,000) Euros, or
both.

2. A person who knowingly or recklessly provide false information in connection with an
application for a license or permit, an application for approval of acquisition of an
interest in a bank, or a report required by the CBK under this Act is guilty of an offense
and upon conviction may be subject imprisonment for up to three (3) years, a fine of up
to ten thousand (10,000) Euros, or both.

Article 85
Regulations and Orders of the CBK

1. The CBK shall be empowered to issue such regulations, orders or guidelines and to
take such other action as it shall deem necessary or advisable to give effect to the intent
of this Law.

2. The CBK shall publish its regulations and orders, which shall take effect on the date of
such publication or on such later date as such order, or regulation shall specify.

Article 86
Fees

1. The CBK may charge fees for the processing of a license or permit application, the
issuance of a license or permit and for the possession of a license or permit. All such fees
shall be non-refundable.

2. The CBK shall charge fees to banks for its supervisory and regulatory services in order
to defray its direct and indirect costs incurred in providing such services. Fees shall be
assessed against banks in relation to the amount of their assets or based on any
extraordinary expenses incurred by the CBK or its agents in relation to its supervisory

73 activities with respect to a particular bank. Banks shall pay fees within ten days of
presentation of a statement by the CBK.

Article 87
Judicial Review

1. Final orders and decisions of the CBK or its agents, including any CBK-appointed
Official Administrator or receiver, under this Law shall be subject to judicial review in a
court of law or an arbitration proceeding in accordance with the Law on Central Bank.

2. The requirements of the Central Bank Law for indemnification of members of the
Central bank’s decision-making bodies or its staff, or an agent of the central bank shall
extend to indemnification of costs incurred in the defense of a legal action brought
against such persons in connection with the discharge or purported discharge of official
tasks within the scope of his employment or engagement under this Law.

Article 88
Interpretation

1. The headings of the sections in this Law are to be used solely for convenience of
reference and are not a part of and are not intended to govern, limit or aid in the
construction of any term or provision hereof.

2. Terms used in the conjunctive or disjunctive in this Law may be read vice versa
whenever the change is necessary to effectuate the obvious intention of the provision in
question.

3. Words in the singular in this Law may be construed as plural and vice versa whenever
the change is necessary to effectuate the obvious intention of the provision in question.

PART XIII
TRANSITIONAL AND FINAL PROVISIONS FOR BANKS

Article 89
Transitional Provisions

Any existing bank that is already licensed by CBK is permitted to continue their
operations under their current license. However all banks must meet the requirements of
this Law, together with any applicable CBK Regulations and Orders within 6months of
the entry into force of this Law.

74
CHAPTER II
MICROFINANCE INSTITUTIONS AND NON-BANK FINANCIAL
INSTITUTIONS

PART XIV
GENERAL PROVISIONS

This chapter applies to the operations of Microfinance Institutions and NBFIs in Kosovo
as defined under the present law and provides a legal framework for their registration,
supervision and regulation.

Article 90
Definitions

For the purpose of this chapter, the following terms shall have the following meanings:

Capital or Equity – the net worth or funds of a Microfinance Institution that is the
difference between its assets and liabilities in accordance with balance sheet accounts that
reflect international accounting standards and shall include, if the microfinance institution
is a branch of a Microfinance Institution Licensed in another country, its Capital
Equivalency Deposit.

Donated Capital – capital funds provided by a Donor as a gift or grant.

Loan – any disbursement or commitment to disburse a sum of money in exchange for a
right to repayment of the amount disbursed and outstanding and with, or without, the
payment of interest or other charges on such amount, and including any extension of the
due date of the corresponding debt;

Loan Limits – a loan from a Microfinance Institution with a maximum principal amount
of twenty five thousand (25,000) Euros to a single legal entity and related individuals and
related entities collectively; and for a person it means that the total amount of annual debt
service, including principal and interest, for all loans may not exceed twenty five percent
(25%) of the individual’s total annual income.

Low-income household – a household with annual gross income which is equal to, or
less than, one and one-half times the amount of individual annual gross income which is
not subject to tax according to the Tax Administration of the Ministry of Finance;

Low-income individual – a person with annual gross income which is equal to, or less
than, the amount of individual annual gross income which is not subject to tax according
to the Tax Administration of the Ministry of Finance;

75 NGO Microfinance Institution – a Microfinance Institution that is registered at the
Ministry of Public Administration for the purpose of its tax exempt status as well as at the
CBK as a non-governmental organization which has a charitable purpose as its mission.
An NGO Microfinance Institution is not permitted to sell or transfer its business, merge,
or change its structure, nor is it permitted to distribute or in any way pay out profits,
surplus capital, dividends, or any of its assets, except in compliance with this Law.

IFRS – International Financial Reporting Standards which are the principle based
international accounting standards, interpretations, and framework adopted by the
International Accounting Standards Board.

Surplus Capital – the accumulated funds derived from the activities and operations of a
Microfinance Institution.

All definitions contained in Chapter One of this Law also apply to this chapter.

Article 91
Prohibitions

1. No person shall engage in the business of a Microfinance Institution or a NBFI without
being first registered with the CBK under the provisions of this Law, and without being at
all times in full compliance with this Law and with all applicable Regulations and Orders
issued by the CBK.

2. No Microfinance Institution or NBFI incorporated outside Kosovo shall be permitted
to engage directly or indirectly in any financial activity in Kosovo unless the activity is
undertaken through a branch office or subsidiary duly registered with the CBK, and
meeting all requirements of this Law and the CBK.

3. No Microfinance Institution or NBFI shall use the word “bank”, or any derivative of
the word “bank”, in its title, and any other word that is misleading concerning its
financial activities, its financial condition, legal status or connection with government or
international institutions.

4. No existing Microfinance Institution will be permitted to continue its operations
without applying for a new registration under the present regulation within a period of
three (3) months from the entry into force of this Law.

5. NBFIs that that are already licensed by the CBK are permitted to continue their
operations under their existing licenses.

6. No Microfinance Institution shall engage in collecting deposits without prior, express
written approval of CBK. In no event may a MFI engage in collecting deposits in excess
of fifty percent (50%) of its Surplus Capital or a maximum of one hundred and twenty
five thousand (125,000) Euros whichever is less.

76
7. NBFIs may not engage in taking of any deposits.

PART XV
REGISTRATION OF MICROFINANCE INSTITUTIONS AND NON-BANK
FINANCIAL INSTITUTIONS

Article 92
Registration and Supervision of Microfinance Institutions and NBFIs

1. All legal entities seeking to operate as an NGO Microfinance Institution must register
at Ministry of Public Administration and all legal entities seeking to operate as Joint
Stock Company Microfinance Institutions must first register with the Ministry of Trade
and Industry. Evidence of this registration must be presented to the CBK and thereafter
all Microfinance Institutions shall also be registered at CBK. The provisions contained in
PART II, Articles 7-14 of this Law shall apply to the registration of Microfinance
Institutions.

2. Upon receiving an application for registration, the CBK shall review the information
submitted and once it deems the information complete it shall notify the applicant
accordingly in writing. The CBK shall issue a Regulation providing the format and
specifying the information required to be submitted in the application for registration.

3. All NBFIs must be regulated by CBK. The CBK shall issue a regulation providing for
the format and specifying the information required for each type of NBFI.

4. No later than ninety (90) days after the applicant has been notified by the CBK that the
application for registration is complete, the CBK shall issue a decision approving or
denying the registration. By mutual agreement between the CBK and the applicant, the
decision period can be extended for up to ninety (90) days. A notification of the denial of
the registration shall state the grounds on which the registration was denied.

5. The registration of a Microfinance Institution or a NBFI shall be approved for an
indefinite period of time and is not transferable. Once registered, a Microfinance
Institution or a NBFI shall commence operations within six (6) months from the date of
the notification of the registration. If it does not commence operations with such time, the
registration becomes invalid. The Microfinance Institution or NBFI may reapply for
registration.

6. All Registered Microfinance Institutions and NBFIs are required to be listed in the
register of financial institutions maintained by the CBK.

77 7. All Microfinance Institutions and NBFIs shall be supervised and regulated solely by
the CBK under the provisions of this Law.

PART XVI
PERMITTED ACTIVITIES

Article 93
Permitted Activities of Registered Microfinance Institutions

1. The main purpose of Registered Microfinance Institutions is to provide Loans
primarily to Low-income households and individuals, and micro and small legal entities.

2. The maximum aggregate amount of the Loans outstanding for the benefit of any single
person or for a single entity or for the benefit of a single legal entity or a group of related
individuals shall not exceed the Loan Limits. The maximum aggregate amount of the
Loans outstanding for the benefit of any single legal entity or for the benefit of a group of
related business interests, defined as legal entities that either are affiliated or for which
the same individuals exercise control shall not exceed the Loan Limits.

3. Registered Microfinance Institutions may also engage in the following activities:

3.1. providing payments services in connection with Loans extended to clients;

3.2. acquiring funds by grant or by borrowings for the purpose of lending or for
their own use;

3.3. borrowing from and placing funds in markets and specified institutions that
have been approved by the CBK for the purpose of managing their liquidity;

3.4. acquiring, owning, leasing, renting, maintaining, transferring, selling or
disposing of any movable or immovable property that is used for carrying out
their business; and

3.5. providing financial, technical and professional assistance and training to their
clients or assisting them in obtaining services in such fields.

3.6. microfinance Institutions may also engage in such other financial activities as
the CBK may determine by Regulation or Order.

3.7. the CBK may also prohibit or restrict any Registered Microfinance
Institution from engaging in any of the permitted activities set out in this Article
of this Law. In such a case, the CBK will provide reason(s) in writing for its
decision.

78 Article 94
Permitted Activities of Registered NBFIs

1. The main purpose of NBFIs is to extend credit, enter into loans and lease agreements;
underwrite, or trade securities; act as an investment company, or investment advisor; or
provide other financial services such as foreign exchange/money changing; credit cards;
factoring or guarantees; or provide other financial advisory, training or transactional
services.

2. As part of their purpose NBFIs may also engage in the following activities:

2.1. providing payment services in connection with credit extended to clients;

2.2. acquiring funds by grant, investment or by borrowings for the purpose of
lending or for their own use;

2.3. borrowing from and investing funds in markets and institutions approved by
the CBK for the purpose of managing their liquidity;

2.4. providing credit to finance the purchase of equipment;

2.5. acquiring, owning, leasing, renting, maintaining, transferring, selling or
disposing of any movable or immovable property that is used for carrying out
their business;

2.6. transfers and remittances of money, or payment services, on payments
originating within or outside the country; and

2.7. providing financial, technical and professional assistance and training to their
clients or assisting them in obtaining services in such fields.

3. The maximum amount of a loan that an NBFI may disburse to any single person or
legal entity cannot exceed twenty percent (20%) of the then outstanding loan portfolio.

4. NBFIs may also engage in such other financial activities as the CBK may determine by
Regulation or Order.

5. The CBK may also prohibit or restrict any NBFIs from engaging in any of the
permitted activities set out in this Article of this Law. In such a case, the CBK will
provide reason(s) in writing for its decision.

79
PART XVII
ORGANIZATION, MANAGEMENT AND ADMINISTRATION
OFMICROFINANCE INSTITUTIONS AND NON-BANK FINANCIAL
INSTITUTIONS

Article 95
Transactions of Microfinance Institutions and NBFIs that Require Prior
Authorization from the CBK

1. The following transactions of a Microfinance Institution or a NBFI require prior
written approval from the CBK:

1.1. the change of name;

1.2. the opening of new locations or any change of location;

1.3. the sale or transfer of its business to a different entity;

1.4. any merger or acquisition of the Microfinance Institution or NBFI;

1.5. if the Microfinance Institution or NBFI is a legal entity, all transactions and
operations involving its Paid-in Capital modifying the list of the shareholders
owning ten percent (10%) and more of the share Capital and/or of the voting
rights of the company;

1.6. a NGO Microfinance Institution is not permitted to sell or transfer its
business, merge, divest, or otherwise change its structure, mission, or ownership,
except in compliance with provisions of voluntary liquidation, receivership, or
Official Administration as provided in this Law and with the written approval of
the CBK; and

1.7. a NGO Microfinance Institution is not permitted to distribute or in any
manner pay out income, profit, surplus or other assets, liabilities or capital except
in compliance with this Law and with the written approval of the CBK.

1.8. Microfinance Institutions as a shareholder, may not distribute dividend
without prior approval by CBK.

80 Article 96
Governance of Microfinance Institutions and NBFIs

The activities of a Microfinance Institution and NBFI are governed and managed by and
under the direction of its executive bodies in conformity with this Law and the
institution’s legal status. The Microfinance Institution or NBFI must perform in
accordance with accepted principles of good governance ensuring that the business of the
institution is conducted in a safe and sound manner. The Microfinance Institution or
NBFI must comply with all applicable Regulations and Orders issued by the CBK.

Article 97
Board of Directors of Microfinance Institutions and NBFIs

1. Microfinance Institutions and NBFIs unless otherwise required by CBK shall be
administered by the Board of Directors appointed by the Founder, shareholders or
owners, consisting of an uneven number of not less than three (3) members, majority of
which must be independent and non-executive. All members of the Board of Directors
shall be “fit and proper” and of good repute, meeting the criteria established by the CBK
regarding qualifications, experience and integrity of the members of the Board of
Directors. Prior to assuming their office, members of the Board of Directors of a
Microfinance Institution must have written approval by the CBK.

2. The Board of Directors and its members may not delegate their responsibilities to
others.

3. The Board of Directors must appoint the Executive Director and Chief Executive
Officer or General Manager at duly called annual meetings. The Board of Directors must
meet at least twice a year.

4. Any changes in the executive body or General Manager, or any Senior Managers and
in members of the Board of Directors must be submitted to the CBK for approval.

Article 98
Committees

1. In its management, organization, administration and control functions, the Board of
Directors of a Microfinance Institution is assisted by the establishment of at least two
Committees:

1.1. an Audit Committee which includes and is chaired by a non-executive
member of the Board of Directors, at least one member of the Audit Committee
may be an outside expert in the field of accounting or audit;

1.2. a Risk Management Committee; and

81 1.3. any other committees deemed necessary or appropriate.

2. Ordinary meetings of the Committees are convened according to a calendar fixed by
the Board of Directors. Extraordinary meetings of the Committees may be convened by
two (2) members of the Board of Directors or by two members of the Committee. A
member of the Board of Directors may serve on more than one Committee.

3. NBFIs must have at least one committee that performs these functions.

Article 99
Chief Executive Officer

Day-to-day activities of a Microfinance Institution or a NBFI are under the responsibility
of the Chief Executive Officer or General Manager appointed by the Board of Directors
and reporting to it. That person shall not simultaneously serve as the Chairperson of the
Board of Directors, unless approved by the CBK. This person must be submitted in
advance to the CBK for its review and approval prior to the person being appointed.
Changes to the person in this position must be approved in advance by the CBK.

Article 100
Secrecy

Present and previous directors and managers, employees, and agents of a Microfinance
Institution or NFBI shall keep secret, and not use for personal gain or gain for the others
by any other than the Microfinance Institution or NBFI that they serve or have served,
shall not permit to be examined by others, and do not disclose any non-public
information that they obtained in the course of their services for the Microfinance
Institution or NBFI. Such information may be disclosed only to the CBK, including its
inspectors and examiners appointed by it, external auditors of the Microfinance
Institution or NBFI, judicial authorities acting upon the order of the Court in criminal
cases, as provided by the applicable law and then when such disclosure is required for
protection of interests of Microfinance Institution or NBFI in a court proceeding.

82
PART XVIII
PRUDENTIAL REQUIREMENTS FOR MICROFINANCE INSTITUTIONS AND
NONBANK FINANCIAL INSTITUTIONS

Article 101
Minimum Capital

1. The minimum amount of Paid-in Capital to establish and maintain a Microfinance
Institution is two hundred thousand (200,000.00) Euros, or such other amount as may be
determined in a regulation issued by CBK. The minimum amount of Paid- in Capital for
NBFIs is dependent upon the particular activities of the NBFI and will be established by
the CBK in a separate regulation.

2. All credit extended by a Microfinance Institution or NBFI to members of its Board of
Directors; its Executive Director or Chief Executive Officer or General Manager; those
holding a Significant interest; and those who are Related Individuals or business
organizations with respect to the aforementioned will be reported to the CBK and
deducted from paid-in Capital for the purpose of establishing compliance with CBK
Regulations or Orders.

PART XIX
ACCOUNTING, AUDIT AND FINANCIAL REPORTING

Article 102
Accounts and Financial Statements and Reports

1. All Microfinance Institutions and NBFIs shall maintain accounts and records, and
prepare annual financial statements, adequate to reflect their operations and financial
condition in accordance with IFRS accounting standards. Accounts and records shall also
reflect the operations and financial condition of their branch offices, subsidiaries and
affiliates, both on an individual and on a consolidated basis. Regulatory reports to CBK
shall be prepared on a consolidated basis, consolidating the financial activities of all
offices.

2. Accounts and financial statements shall be in such form and detail and in accordance
with IFRS accounting standards and such other accounting standards as shall be
prescribed by the CBK.

3. All Microfinance Institutions and NBFIs will be required to prepare and submit all
reports and statements as required by the CBK, including monthly, quarterly and annual
reports of loans and financial statements, according to the format of the CBK.

83 Article 103
Audit

1. All Microfinance Institutions and NBFIs will have an annual audit according to IFRS
accounting standards and performed by an auditing company authorized for such
purposes by the CBK. The auditor must be approved in advance by the CBK.

2. The CBK may because of special circumstances, require by Order or Regulation
specific Microfinance Institutions or NBFIs to have an internal auditor. The auditor must
be approved in advance by CBK. The duties of the internal auditors may be specified by
CBK Regulations or Order.

PART XX
SUPERVISION AND CONTROL OF ALL MICROFINANCE
INSTITUTIONS

Article 104
Supervision and Examination

All Microfinance Institutions and NBFIs are subject to examinations by the examiners of
the CBK or by agents appointed by the CBK. Such examiners may include officials of the
authority of another country that is charged with the prudential supervision of financial
activities in that country where the institution is a branch or a subsidiary of a
Microfinance Institution or NBFI supervised by the other country’s regulator.

PART XXI
INFRACTIONS, SANCTIONS AND REMEDIAL MEASURES

Article 105
Infractions, Penalties and Remedial Measures

1. The CBK may take one or more of the following actions or impose the following
penalties with respect to a Microfinance Institution or NBFI if the CBK, in its findings,
determines that the Microfinance Institution or NBFI or any of its Senior Managers or
Directors or holders of a Significant interest have violated a provision of any Regulation
or Order of the CBK, or has engaged in unsafe or unsound practices:

1.1. issue written warnings;

1.2. require the Microfinance Institution or NBFI to submit a remedial plan;

84 1.3. conclude a written agreement with the Board of Directors providing for a
program of remedial action;

1.4. impose limits and/or place restrictions on the activities and operations of the
Microfinance Institution or the NBFI;

1.5. issue written Orders to cease and desist from such infractions and to
undertake remedial action;

1.6. impose fines on the Microfinance Institution, the NBFI or on its Senior
Managers, Directors, Principal shareholders or those holding Significant interest
in it, in amounts of from one hundred (100) to one thousand (1,000) Euros for
each day that the infraction continues;

1.7. appoint an advisor to the Microfinance Institution or the NBFI;

1.8. suspend temporarily or dismiss Senior Managers or a member or members
thereof, the Board of Directors or a member or members thereof;

1.9. appoint an Official Administrator in place of current Senior Management and
the Board of Directors; and

1.10. revoke the registration of the Microfinance Institution or NBFI and appoint
a Receiver pursuant to the provisions of this Law.

Article 106
Suspension and Removal of Persons Related to a Microfinance Institution or Non-
Bank Financial Institutions

1. If the CBK determines that any Director or Senior Manager, Receiver, employee or
holder of a Significant interest in a Microfinance Institution or NBFI has willfully or
repeatedly committed any violation of the present regulation or any Rule or Order that
has resulted in a material loss to the Microfinance Institution or NBFI or a financial gain
to such a person or has engaged in unsafe or unsound practices and has persisted in such
violations or practices following a written warning from the CBK, the CBK may issue an
Order containing any or all of the following provisions:

1.1. requiring the dismissal of the person from his or her position in the
Microfinance Institutions or NBFI;

1.2. prohibiting such person from serving in or engaging in any financial
institution business for a stated period or for life;

1.3. prohibiting the person from direct or indirect exercise of voting rights of the
Microfinance Institution or NBFI; and

85 1.4. requiring the person to dispose of all or any part of his or her direct or
indirect ownership interest in the Microfinance Institution or NBFI or cease to
hold a Significant interest in it and may also require that person to reimburse the
Microfinance Institution or NBFI for financial losses, including a reasonable rate
of interest, caused by such violations.

PART XXII
VOLUNTARY LIQUIDATION, MANDATORY RECEIVERSHIP AND
OFFICIAL ADMINISTRATION

Article 107
Voluntary Liquidation

If the founders, shareholders, directors or owners of a Microfinance Institution or NBFI
wish to voluntarily liquidate the Microfinance Institution or NBFI they shall submit a
request for approval of the voluntary liquidation to the CBK accompanied by such
information as the CBK may prescribe. The CBK shall make due inquiry into the affairs
of the Microfinance Institution or NBFI and, if it assures itself that the borrowers’
interests or other borrowers’ interests will be sufficiently protected, may approve the
voluntary liquidation.

Article 108
Mandatory receivership

If the CBK determines that a Microfinance Institution or NBFI is insolvent or that it may
reasonably be expected to become insolvent, the CBK may revoke the registration of that
Microfinance Institution or NBFI and shall forthwith take possession and control of that
Microfinance Institution or NBFI through a Receiver appointed by the CBK. This
proceeding shall be known as Receivership and the provisions of this Law particularly
Part XI shall apply.

Article 109
Official Administration

1. The CBK may appoint an Official Administrator for a Microfinance Institution or
NBFI in the event any of the grounds contained in Article 60 of this Law are found to
exist. Upon appointment of an Official Administrator, all provisions of Part X of this
Law, shall apply to the Official Administrator of a Microfinance Institution or NBFI.

2. Notwithstanding the foregoing, the CBK may determine that the Microfinance
Institution is or has become solvent. In that event the term limits for the appointment of
the Official Administrator contained in Article 61 of this law may be extended by written

86 order of CBK so as to provide adequate time for the orderly sale or other disposition of
the Microfinance Institution.

Article 110
Treatment of Donated Capital and Surplus Capital

1. In the event of voluntary liquidation, mandatory receivership, or official administration
of an NGO Microfinance Institution, any remaining Donated Capital or Surplus Capital
must be returned to the original donor(s) or distributed for charitable purposes in Kosovo
as may be directed by the original donor (s). If the initial capital of donator is not
returned, Donated Capital and the Surplus Capital will be distributed for charitable
purposes according to applicable Laws and the plan approved by CBK.

2. Neither the CBK itself nor the members of decision- making bodies, or persons related
to CBK are permitted to benefit either directly or indirectly from any plan for the
charitable disposition of the Donated Capital and Surplus Capital.

PART XXIII
CREATION OF JOINT STOCK COMPANY

Article 111
Procedures

1. Any NGO Microfinance Institution in order to be registered in the Ministry of Trade
and Industry and in CBK as a Microfinance Institution joint stock company should
implement provisions of Article 110 and 112 of this Law on Donated Capital. Any use of
Donated capital or surplus capital shall be subject to the tax of Tax Administration of
Kosovo. Evidence of compliance with the Tax Administration of Kosovo must be
submitted to the Ministry of Trade and Industry or its successor as part of the registration
as Joint Stock Company and must also be submitted to CBK. Upon registration as a Joint
Stock Company at the Ministry of Trade and Industry, the NGO Microfinance Institution
registration at the CBK must be terminated and new registration as a Joint Stock
Company Microfinance Institution must be completed and delivered to CBK within two
(2) weeks.

2. The registration as an NGO Microfinance Institution remains in effect until terminated,
however it shall be the responsibility of the Microfinance Institution to submit an
application for registration at CBK as a Joint Stock Company Microfinance Institution.

3. The Microfinance Institution is also required to notify the Ministry of Public
Administration in order to remove its NGO tax exempt status.

87
PART XXIV
CRITERIA FOR INVESTMENT IN A BANK BY MICROFINANCE
INSTITUTION

Article 112
Procedures on application for bank license

1. A Microfinance Institution may invest in an ownership of a bank up to a maximum of
twenty five percent (25%) of the Paid-In Capital of that bank upon approval of CBK. All
of the ownership shares must be paid for in cash out of surplus capital by a Microfinance
Institution. The remaining seventy five percent (75%) of the ownership shares and Paid-
In Capital of the Bank must be from private sector qualified investors who become
shareholders.

2. All Microfinance Institutions as a joint stock company that seek to invest in the
ownership of a bank must comply with all provisions of Chapter I of this Law, as well as
other additional requirements that CBK considers them as reasonably adaptable foreseen
in Article 7 of this Law.

3. All Directors and Senior Managers of the bank must meet the eligibility and
professional requirements and be approved as “fit and proper” by the CBK. In no event
the Director of the Microfinance Institution may serve as a Director of a bank. No person
can be at the same time a manager or senior manager of both the Microfinance Institution
and the bank.

4. In the event of investment in a bank that the Microfinance Institution has an ownership
interest in, the Microfinance Institution shall have the following options:

4.1. it may continue to conduct business and operate as a Microfinance Institution
under the provisions of this Law with the remaining capital and continuing its
lending operations, or;

4.2. it must pay all Donated Capital, if any, back to the original charitable donors,
or otherwise insure that the Donated Capital is used for a charitable purpose in
Kosovo by submitting a plan for distribution which is approved by CBK. The
remaining Surplus Capital, if any, must also be used for a charitable purpose by
submitting a plan for distribution which is approved by CBK. Any plan for
distribution approved by the CBK must provide that neither the Microfinance
Institution or its shareholders nor the CBK itself, or the members of decision-
making bodies of CBK, or persons related to CBK will benefit directly or
indirectly.

88
PART XXV
MISCELLANEOUS PROVISIONS

Article 113
Prevention of Money Laundering

1. No Microfinance Institution or NBFI shall conceal, convert, or transfer cash or other
property, if it knew or ought to have known that such cash or other property is derived
from criminal activity, or aiding or abetting any person in concealing or disguising the
illicit origin of any cash or property.

2. Microfinance Institutions and NBFIs shall comply with the Law on The Prevention of
Money Laundering and Financing of Terrorism. Central Bank of Kosovo and the Finance
Intelligence Unit shall cooperate in accordance with applicable Laws.

3. Microfinance Institutions and NBFIs will comply with all laws, regulations, rules,
instructions, procedures and orders relating to anti-money laundering and anti-terrorism
financing.

Article 114
Regulatory and Supervisory Powers of the CBK

The CBK shall be empowered to issue such Regulations, or Orders to visit such offices of
Microfinance Institutions and NBFIs at such reasonable times as it deems appropriate, to
examine such accounts, books, documents and other records, and to take such other
action as it shall deem necessary or advisable to give effect to the intent of the present
Law or Regulations or Orders issued.

Article 115
Regulations, Orders and Instructions of the CBK; Fees

1. The CBK shall publish its Regulations, Instructions and Orders which shall take effect
on the date of such publication or on such later date defined by sub-legal acts.

2. The CBK shall charge fees to Microfinance Institutions and NBFIs for its supervisory
and regulatory services in order to recover its direct and indirect costs incurred in
providing such services. Fees shall be assessed on a cost recovery basis or based on any
extraordinary expenses incurred by the CBK or its agents in relation to its supervisory
activities with respect to a particular Microfinance Institution. Microfinance Institutions
shall pay fees within ten days of presentation of a statement by the CBK. The CBK shall
also charge fees to Microfinance Institutions for the use of the Credit Registry.

89 Article 116
Transitional Provisions for Microfinance Institutions

1. Any existing Microfinance Institutions must meet the requirements of this Law,
together with all applicable CBK Regulations and Orders in all their operations, and are
required to apply for a new registration no later than three (3) months after the entry into
force of this amending Law.

2. After the application is submitted and registration is completed under this Law with
CBK, NGO Microfinance Institutions will no longer be regulated by the Ministry of
Public Administration.

Article 117
Effect on Previous Statutory Provisions

The United Nations Interim Administration Mission in Kosovo (UNMIK) Regulation No.
1999/21 of 15 November 1999, UNMIK Regulation No. 2008/28 of 28 May 2008, and
any amendments thereto are hereby replaced upon enactment of this Law. Any rules
promulgated under such regulations shall continue in effect, to the extent they are not in
conflict with this law or until modified or repealed by the CBK.

Article 118
Entry into Force

This Law shall enter into force on 12 April 2012.

Law No. 04/L-093
12 April 2012

President of the Assembly of the Republic of Kosovo
___________________________
Jakup KRASNIQI