Mehmed Ganić

The Impact of the Global Financial Crisis on the Banking Sector of Western Balkans: Cross-Country Comparison Analysis

The aim of this paper is to examine the extent and impact of the global financial crises on position of the banking sector of Western Balkans covering both pre-crisis and crisis period as well as to provide an explanation for these trends.This paper deals with cross-country comparison analysis of banking in Western Balkans before and during crises. Although, depth of the crisis in the banking sector of Western Balkans is not yet fully evident, selected indicators in this paper point to its direction. The research alone has determined the paper’s structure which consist an analysis of the impact of the global financial crisis on recent occurrences in the banking of the region.Impact of global financial crises has been transmitted on the position banking sector selected countries through several sources, especially through: impact profitability, credit growth has dropped significantly and asset quality has deteriorated markedly.Although the economies of Western Balkan countries in crisis period performed differently the results of the comparison show that the global financial crisis has a substantial impact on the banking sector of the region.

The Transmission of European Debt Crisis on the Region of Western Balkans: Some Stylized Facts

This paper aims to analyze economies which are affected by the European debt crisis most by examining the effects on the Western Balkans countries reflected by Foreign direct investments flows of selected countries, trade performance indicators of Western Balkans and remittances from abroad. The analysis comprises the following countries: Albania, Bosnia and Herzegovina, Croatia, Macedonia, Montenegro and Serbia. The data set used in the analysis has been extracted from the following databases: UNCTAD, World bank, Eurostat, World Trade Organization from National statistics.Structure of the paper is given as follows: Section 2 deals with new economic trends and new developments in the countries of Western Balkans from the moment of their independence. Section 3 discusses the recent developments in the foreign trade for the last decades between European Union-27 and Western Balkan also it describes the main specific features of the overall trade performance indicators of Western Balkan for last two decades. Section 4 compares and analyses the implications of debt crisis in European Union-27 on the economies of Western Balkans during current debt crisis.Our findings show that the debt crisis in European Union-27 has indeed affected the countries of Western Balkans to a particular degree through financial and trade linkages.

Economic Disturbances and Business Fluctuations in Economy of Bosnia and Herzegovina – The Ongoing Story

The crisis of economy of Bosnia and Herzegovina is a perennial. For nearly a decade, the economy of B&H had been buffeted by global crisis after transitional crisis which has exacerbated some latent trends and initiated new ones. Its causes have been the external and internal, and it would exist without the global financial crisis. This paper aims to analyze economy of Bosnia and Herzegovina (B&H) and gives a critical overview of ongoing economic crisis in B&H by examining by foreign direct investments flows, trade performance indicators and remittances from abroad.Structure of the paper is given as follows: Section 2 deals with new economic trends and new developments in the countries of Western Balkans from the moment of their independence.Section 3 discusses the recent developments in economy of B&H and also it describes the main specific features of the overall trade performance indicators of Bosnia and Herzegovina for a last decade.Our findings show that the debt crisis in European Union-27 has indeed affected the countries of B&H to a particular degree through the downslide in the goods trade, unemployment is rising and purchasing power of food consumers is declining, which beside economic causes social and political problems.

The Integration of Western Balkan Economies in Global Economic Flows

In the last decade of the twentieth century, the process of internationalization of production and trade has been intensified. It is a process of opening of national markets in terms of free flow of goods, capital and labor. Moreover, it contributes to sustainable development by offering better conditions under which goods are produced and traded. From the moment of independence countries of Western Balkan have chosen to become democratic societies followed by other advanced transition countries. All countries of the Western Balkan (WB) have accepted the market economy as the basic orientation and long-term perspective of their social and economic development. This fact constant of the new economic reality in the WB region had certain significance to their further development. The main objective of this paper is to show the effects of globalization on the level of integration of the WB in the global economic flows. This paper uses a cross-country comparison methodology and examines the following aspects: progress made with capital account liberalization on the economy of Western Balkan region, what are the changes in the structure of trade, as well as the involvement of these countries in the global financial system. The process of trade and capital-account liberalization enabled transitional countries to gradually integrate into international trade and financial flows at the end of the 1990s. The effects of such processes have been demonstrated in increased inflow of foreign direct investments, increasing international trade and increasing foreign exchange reserves.The paper is divided into five sections. Section 2 deals with the impact of capital flows on the economy of Western Balkan countries. Section 3 analyzes trends in Trade reorientation of economies of Western Balkan. Section 4 analyzes trends in foreign direct investment (FDI) flows.The findings and discussion presented in previous sections of this article ends with conclusions that the WB countries achieved significant progress in the reorientation of trade and start the process of reintegration into the international financial flows. From an economic point of view, the past decade has shown that all the WB countries largely depend on their cooperation with the EU, either through foreign direct investment, loans or grants. Effect of geographic proximity is an important factor that influenced on high level trade exchanges with the EU gave companies from EU a major competitive advantage in initiating the international expansion of their activities in neighboring countries (WB region). Thanks to the reforms and the promising economic outlook region of WB become a place where investors with regional ambitions had the greatest potential for cross border expansion. This is especially important in the context of the regions aspiration to join the EU.

The Efficiency of Banking Sector in Bosnia and Herzegovina in Comparison to Slovenia: Comparative Analysis

This paper analyzes the banking sectors performance of the two former Yugoslavian republics, Slovenia and Bosnia and Herzegovina. This study is the first study examining the efficiency of banking sector of two countries. Countries have formed their banking systems, with their central banks as central and main monetary institutions. Performance of the banking sector of the two countries is being examined, taking into account that one country is a post war country, while other succeeds to join to European Union. It is determined using the data on return on assets (ROA) as indicator of profit, and return on equity (ROE) as an expression of rentability of banking sector, then compared to nonperforming loans (NPL) in order to foreseethe affect on future lending. Foreign direct investment is also being examined due to the large portion of it was initially made into banking sector. Financial health of the banking sector is analyzed by comparing deposits to loans figures, in several structural aspects. Based on data Slovenia’s banking sector has higher return on equity throughoutyears, therefore it is more profitable.On the other hand Bosnia and Herzegovina’s banking sector is more risk protected, since banks have higher adequate capital that offers protection against risk.

Perspectives of Application of Currency Board Arrangement with Special Emphasis on Bosnia and Herzegovina

The relevance of an exchange-rate policy is at top priority list of the monetary authority especially taking into account that the main function of CB or monetary authority is to maintain the stability of the domestic currency. Namely, with the processes of globalization and internationalization of the financial markets the exchange rate of the national currency is more significantly influenced by trends and movements of their most important (global currencies) world currency exchange rates. The aim of this paper is to provide an overview and analysis of development and application of CBA in B&H primary with the aspect of achievement of its functioning as well as its sustainability. Starting from the problem and research objectives following hypothesis is set: Application of CBA in B&H led to the preservation of monetary stability in B&H. For the purposes of assessment of sustainability CBA in B&H we used four types of indicators: Indicator of currency board stability, Indicator of coverage monetary base by foreign reserves, Indicators of coverage monetary base by money supply, as well as Indicator of coverage monetary liabilities by net foreign reserves. The introduction of the CBA in B&H has proved to be very successful. Regulation of the monetary system and restore lost public confidence were significant results of CBA policy.

Institutional Aspects of Prudential Supervision of Banks in Bosnia and Herzegovina with Special Emphasis on Banking Risk Management

The goal of this paper is to analyze banking regulation in Bosnia and Herzegovina and the progress made by banks in the management of banking risks. Basel Committee on Banking Supervision requires banks to establish a reasonable infrastructure for risk management. This infrastructure should identify, measure, monitor and control the risks that the bank is exposed to their operations. In this sense, the work was carried out research on the management of credit risk, liquidity risk and operational risk in order to gain knowledge about the progress of the banking sector in Bosnia and Herzegovina on the implementation of Basel 2. This paper represents the results of a research carried out on twenty out of thirty planned banks in Bosnia and Herzegovina that were surveyed during 2009, which makes 66.6% of the total sample (or 83.17% of total assets of the banking sector in Bosnia and Herzegovina). Summarized results of the questionnaire also showed further progress of the banks in complying with Basel 2, although it turned out that they often react to developments and changes without the existence of necessary infrastructure and business culture to keep it.

The Labour Market, Social Inequality and the Role of Emigration: The Case of the Western Balkan Economies

It has been more than two decades since the beginning of the transition in the Western Balkan region, and its results have not shown a significant improvement in the life quality of its citizens. While economic growth rates during the post-war period were modest, with low inflation and a disappointing inflow of FDI, the process of privatisation, deindustrialisation and job cuts led to an increase in the unemployment rate and a further reduction in the overall living standard. The main aim of this chapter is to critically analyse some of the economic trends in the countries of the Western Balkans, with a particular focus on the increasing unemployment rate, income inequality and migration trends. This research covers five Western Balkan countries in comparison with the three EU countries (Bulgaria, Croatia and Romania) over the period from 2000 to 2016. The chapter reveals that the region as a whole has made modest, though uneven, progress towards becoming a functioning market economy. Also, the chapter identifies serious problems including the persistence of very high unemployment rates in the Western Balkan region, large-scale emigration, a huge outflow of educated and skilled workers and widespread poverty.

An Empirical Analysis of Factors Affecting Bank Interest Margins: Evidence from the South East European Countries

Abstract This paper provides an empirical analysis of factors affecting Bank Interest Margins in eight countries of the South-East European (SEE) region between 2000 and 2014. The purpose of this paper is to examine and investigate the main drivers of Bank Interest Rate Margins across selected countries throughout the SEE region. Also, the study explored the relationship between the dependent variable Interest Rate Spread (IRS - as a proxy variable for measuring variation in Bank Interest Rate Margins) and a set of selected banks’ specific variables in SEE by employing panel data estimation methodology. This research is based on aggregate data for the whole banking sector of each country. In line with some expectations, our findings confirm the importance of credit risk, bank concentration operative efficiency, and inflation expectations in determining Bank Interest Rate Margins. Interestingly, in contrast to the majority of recent empirical research, the study found an inverse relationship between the bank concentration variable and Bank Interest Rate Margins as well as between the operational efficiency variable and Bank Interest Rate Margins. Also, the study could not find statistically significant evidence that Bank Interest Rate Margins are determined by output growth, bank profitability (measured by ROA) or liquidity risk.

Bank Specific Determinants of Credit Risk - An Empirical Study on the Banking Sector of Bosnia and Herzegovina

The main aim of this paper is to examine the influence of bank specific determinants on realization of credit risk in the portfolio of commercial banks in Bosnia and Herzegovina (B&H). This study comprises a sample of seventeen out of twenty eight planned banks that are analyzed over the period of 2002 to 2012. The effect of variations in the determinants of bank credit risk exposure is based on using a multivariate panel regression model. Our empirical results suggest that a significant relationship exists between credit risk and the following variables:[Inefficiency (IE), profitability (ROE), Credit growth (CG) and Deposit rate (DR) while variables Solvency (SR), Loans to deposit ratio (LTD), Market power (MP), profitability (ROA) and Reserve ratio (RR)] are not statistically significant in terms of credit risk.