<abstract xmlns="http://www.w3.org/1999/xhtml">

<p>The degree of the banking sector concentration is a structural variable and refers to the number of banks in the system and the degree of their market power. The importance of measuring concentration in the banking sector stems from the causal relationship between the market structure and the competitive behaviour of market participants. Traditional models measuring the banking sector competition proceed from the market structure and concentration measures. In contrast, modern approaches to measuring competition rely on non-structural models and analysis of the behaviour of market participants. The paper analyzes the degree of concentration and competition in the banking sector of the Republic of Serbia. The traditional and most frequently used indices, the concentration ratio and the Herfindahl-Hirschman index, are used to measure concentration. The values of these indices show low banking sector concentration but a rise in the observed period. The values of the comprehensive industrial concentration index and the entropy coefficient confirm the concentration absence in the banking sector of the Republic of Serbia. In addition to the usual banking sector concentration measures, the authors use the Linda index to assess the banking sector concentration and competitiveness, to show the absence of an oligopolistic structure in terms of total balance sheet assets, lending and deposit activity of banks.</p>
</abstract>

The degree of the banking sector concentration is a structural variable and refers to the number of banks in the system and the degree of their market power. The importance of measuring concentration in the banking sector stems from the causal relationship between the market structure and the competitive behaviour of market participants. Traditional models measuring the banking sector competition proceed from the market structure and concentration measures. In contrast, modern approaches to measuring competition rely on non-structural models and analysis of the behaviour of market participants. The paper analyzes the degree of concentration and competition in the banking sector of the Republic of Serbia. The traditional and most frequently used indices, the concentration ratio and the Herfindahl-Hirschman index, are used to measure concentration. The values of these indices show low banking sector concentration but a rise in the observed period. The values of the comprehensive industrial concentration index and the entropy coefficient confirm the concentration absence in the banking sector of the Republic of Serbia. In addition to the usual banking sector concentration measures, the authors use the Linda index to assess the banking sector concentration and competitiveness, to show the absence of an oligopolistic structure in terms of total balance sheet assets, lending and deposit activity of banks.

An Analysis of Concentration and Competition in the Banking Sector of the Republic of Serbia

Economic Themes

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

The degree of the banking sector concentration is a structural variable and refers to the number of banks in the system and the degree of their market power....

An Analysis of Concentration and Competition in the Banking Sector of the Republic of Serbia

Published Online: May 09, 2022

Page range: 427 - 444

Received: Oct 23, 2020

Accepted: Jul 02, 2021

DOI: https://doi.org/10.2478/ethemes-2021-0024

Keywords
concentration, competition, banking sector, concentration ratio, Herfindahl-Hirschman index, Linda index

© 2021 Jelena Radojičić et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

An Analysis of Concentration and Competition in the Banking Sector of the Republic of Serbia

Published Online: May 09, 2022

Page range: 427 - 444

Received: Oct 23, 2020

Accepted: Jul 02, 2021

DOI: https://doi.org/10.2478/ethemes-2021-0024

Keywordsconcentration, competition, banking sector, concentration ratio, Herfindahl-Hirschman index, Linda index

© 2021 Jelena Radojičić et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Keywords
concentration, competition, banking sector, concentration ratio, Herfindahl-Hirschman index, Linda index