Analysis of the concentration of the banking sector of the Republic of Srpska
Analysis of the concentration of the banking sector of the Republic of Srpska

Summary/Abstract: Economic policy measures in the field of protection against excessive market concentration are one of the segments in the wider area of protection of market competition, while the measures of protection of competition are one of the measures of the economic policy of one country. The reason for the existence and application of measures in the field of market concentration, as one of the segments of the competition protection policy, is that imperfect market structures, generally speaking, lead to a decline in a social welfare. The financial sector of the Republic of Srpska is bank-centric and the stability of the entire financial system is conditioned by the stability of the banking sector. At the end of 2015, the banking sector consists of eight banks, while the Bank of Srpska and Bobar Bank are in the process of liquidation. The analysis covers the period 2008-2015. Limitations in the survey are reflected in the objective lack of data on property, financial and income status. This limitation refers to the first few years of the analysis and does not apply to the four largest banks. To measure the concentration, we used two most commonly used measures – Herfindahl-Hirschman concentration index (HHI) and Concentration Ratio (CR). The results indicate a high degree of concentration on the banking market of the Republic of Srpska.

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