ANALYSIS OF THE BANKING SECTOR PERFORMANCE IN BOSNIA AND HERZEGOVINA, MONTENEGRO AND SERBIA BEFORE AND AFTER THE GLOBAL FINANCIAL CRISIS

Abstract

The focus of this study is the banking sector of the three neighbouring countries Bosnia and
Herzegovina; Montenegro; and Serbia. These are former communist countries which have been
going through the transition from centrally-planned economies to open market economies over
the past 25 years. During the transition process, structural reforms were conducted to transform
the banking sector into a sector suitable for open market economy. These reforms are considered
to be the most successful ones in the region. Before the Global Financial Crisis of 2008-09, the
economies of the three selected countries were experiencing credit booms. The aim of this research
was to examine how the banking sector is performing on an aggregated level years after the crisis
and whether the performance is better or worse compared to the pre-crisis period. The findings
show that the banking sector was performing better before the crisis in all three countries. After
the crisis, the three countries experienced prolonged slow credit growth and had higher nonperforming
loans.