RISK MANAGEMENT AND PROFITABILITY OF COMMERCIAL BANKS OF WESTERN BALKANS COUNTRIES OF KOSOVO, ALBANIA, NORTH MACEDONIA, AND SERBIA

Due to their importance, commercial banks currently play a significant role in national financial systems. Commercial banks' profitability depends on how they manage their loans, and credit risk management is thus crucial in the banking system. Risk management is a significant activity of the commercial bank. This study's primary purpose is to observe the extent to which bank profitability is dependent on credit risk management, with a focus on commercial banks in the Western Balkans (Kosovo, Albania, North Macedonia, and Serbia). Determinants of profitability, as return on assets (ROA) and return on equity (ROE). Simultaneously, the ratio of non-performing loans (NLPR) and Capital Insufficiency (CAR) are taken as determinants of credit risk management. The research included 45 banks located in the Balkan countries (Kosovo, Albania, Macedonia, and Serbia) for six years, the period 2013-2019. The results reveal a specific assured correlation among credit risk as well as the profitability of banks, where the ratio of non-performing loans (NLPR) has a positive effect on return on equity (ROE) and return on assets (ROA). Capital Insufficiency (CAR) shows that positive dependence is without any statistical significance on return on equity (ROE) and return on assets (ROA).