Serbian banking sector

SERBIAN BANKING SECTOR

Vladimir Ristanović, PhD

Associate Research

Institute of European Studies

We’re talking about

• Financial (banking) system in Serbia
• how the banking system was created by the transformation of the economy,
• what is the structure of the banking sector, and
• what is the current situation in the banking sector of Serbia.

• A bank is a financial institution where you can borrow money only if you can prove that you do not need it
• Bob Hope

WHAT THE BANK IS?

A bank is a financial institution where you can borrow money only if you can prove that you do not need it

Bob Hope

A BRIEF HISTORY OF THE SERBIAN FINANCIAL SECTOR

• The transformation of the economic system was established in 2000.
• The banking system was created outside Serbia.
• Regulation was weak, at the beginning.
• A market is defined as a shallow financial market.
• Banks generally operate in the traditional way.
• Open market operations are being applied more and more.
• However, in recent years the situation in the banking sector has significantly improved.

EFECTIVE ECHANGE RATE

Statistics are used not to show an individual what he doesn’t need to know

INFLATION RATE

FINANCIAL MARKET

A shallow financial market

BANKING SECTOR IN SERBIA

CONCENTRACTION OF ACTIVITY

The Herfindahl-Hirschman Index (HHI) is a common measure of market concentration and is used to determine market competitiveness, often pre- and post-M&A transactions. The closer a market is to a monopoly, the higher the market's concentration (and the lower its competition). The Herfindahl Hirschman Index (HHI) is calculated as the sum of square values of individual bank shares in the category observed (assets, loans, deposits, etc.). HHI up to 1,000 indicates that there is no market concentration; 1,000–1800 indicates moderate concentration; above 1,800 indicates high concentration.

ASSETS

THE STRUCTURE OF ASSETS

LIABILITIES AND CAPITAL

PROFITABILITY

NON-PERFORMING LOANS

BANK LIQUIDITY

CAPITAL ADEQUITY

As you already know, the regulatory capital consists of: Tier 1 capital, which made up 95.7%, and Tier 2 capital, measuring 4.3%. Tier 1 capital, which is the highest quality segment, is made up of Common Equity Tier 1 capital (99.7%) and Additional Tier 1 capital (0.3%).

2020 and COVID-19 measures

• The state resolutely defended the economy and finances, with following measures:
• Ensure the liquidity of the system
• Support corporate sector
• MIX of monetary and fiscal policy easing measures
• Remain foreign exchange reserves high and stable
• Improve the regulatory framework
• Increase households’ confidence in the local currency and the banking sector

TO SUM UP

• In recent years the situation in the banking sector has significantly improved.
• The state resolutely defended the economy and finances.
• Fitch and Standard & Poor’s affirmed Serbia’s ratings in 2020, despite the global pandemic-induced crisis
• The banking sector as a whole remains highly resilient to the assumed shocks
• The final grade could be more than satisfactory.

Policymakers must always “study the present in light of the past for the purposes of the future” Maynard Keynes

THANKS FOR YOUR ATTENTION

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