COMPARATIVE ANALYSIS OF THE MARKET POWER IN THE BANKING SECTORS

Banking sector plays a key role in the development of financial and the entire economic system. The economic crisis which had a domino effect primarily hit this sector and then there have been a significant changes in the structure of banking markets. Definining market shares has a significant role in estimating market power i.e. measuring the level of competition and dominant position of certain banking institutions. The aim of this paper is to identify the type of structures and estimate the intensity of competition in the banking sector of the Republic of Serbia and Bosnia and Herzegovina (BiH) and hence, a comparative analysis of market structures between these two countries. Dynamic series of reports of the central banks usually include only two valid measures of concentration - the Herfindahl-Hirschman index and concetration ratio of the leader bank or four leading banks. In order to have a complete picture of the structure of the banking market it is necessary to apply a group of indexes that determine the degree of concentration.. For the index calculating purposes in this paper the absolute and relative values of the most dominant items in the assets of the balance sheet of a bank are used, i.e. the amount of each individual loan and amount of the deposits in liabilities of every bank in 2016. In order to make reliable comparison of the structure of the analyzed sectors, in addition to measures of central banks CR4 and Herfindal-Hirschman index the following measures of concentration were applied: Gini coefficient, entropy coefficient and Lorenz curve. It has been found out that there is more market power in the banking sector in BiH than in Serbia and also the higher level of concentration.