Kosovo’s Western partners slam decision to shut banks in majority-Serb areas

Kosovo’s Western partners slam decision to shut banks in majority-Serb areas
Kosovo's central bank declared the euro the primary currency for transactions, replacing the Serbian dinar, which was commonly used in predominantly Serb areas such as north Mitrovica (pictured). / bne IntelliNews
By Valentina Dimitrievska in Skopje May 21, 2024

Six branches of the Serbian Postal Savings Bank in Kosovo were closed by the authorities on May 20 due to their use of the Serbian dinar, which is prohibited under Kosovo law, raising tensions between Belgrade and Pristina.

The closures come after Kosovo's central bank declared the euro as the primary currency for transactions in January, replacing the Serbian dinar, which had been commonly used in predominantly Serb areas of Kosovo. The central bank of Kosovo had set a three-month transition period, ending May 12, for the cessation of the Serbian dinar’s use in cash transactions.

From that date onwards, all cash transactions within Kosovo must be conducted exclusively in euros. The regulation allows non-euro currencies only for value storage, international payments, and foreign exchange activities, imposing strict measures against any cash transactions in other currencies.

The closures followed a request from financial institutions questioning the branches' legitimacy and were executed based on authorisation from the prosecutor’s office.

Kosovo’s Minister of Finance Hekuran Murati addressed the issue during a media conference on May 21 following a government meeting, discussing the police action in northern Kosovo that resulted in the closure of the bank units and the confiscation of millions of euros and dinars, broadcaster RTK reported.

Murati said that the closures were due to well-founded suspicions of illegal financial activities, including operations without the necessary financial licenses.

"We ensure the implementation of legality in the financial field. There have been well-founded suspicions that financial activity is taking place in violation of the law," Murati stated. "The law enforcement agencies are responsible for providing arguments and evidence regarding how these activities were conducted."

Responding to concerns from the US Department of State about the potential escalation of tensions due to the uncoordinated nature of the action, Murati insisted that every action in the north was legally justified. He also mentioned Kosovo's proposals in Brussels regarding the dinar, which were not met with cooperation from Serbia.

"In Brussels, we offered constructiveness in our proposals, but apparently, the Serbian side was not ready. Their intention seemed to be to continue the old way of transferring large sums of money in bags, without transparency," Murati explained.

The European Union also expressed concerns on May 21 regarding the actions of the Kosovo police in closing branches of the Postal Savings Bank in northern Kosovo. The EU criticised the closure and confiscation of these branches, highlighting that these measures were taken without prior notice or coordination just days after dialogue sessions in Brussels. The EU described these actions as escalatory and counterproductive to the spirit of normalising relations between Kosovo and Serbia.