Analysis of Effects of Foreign Bank Entry on Credit Interest Rate Behavior in Serbia
AbstractFollowing foreign bank entry, credit interest rates have been extremely high in Serbia compared with a reference group of countries: Croatia, Bulgaria and Romania. This is connected with monetary authorities poor predictions regarding the behavior of those banks in setting interest rates, creating an illusion that competition, per se, would rapidly result in decreasing interest rates; as well as undertaking monetary policy measures- such as an extreme increase in the reserve requirements rate--that contributed to unchanged or increased credit interest rates. The final outcome of poor predictions and measures undertaken by the National Bank of Serbia is limited to periodical appeals by its highest officials to citizens to consider the conditions under which they borrow from banks. However, under conditions of fully inelastic demand for bank credit and a cartel presence in the banking sector, such appeals are ineffective, merely reflecting an attempt to avoid responsibility for a possible wave of bankruptcies in the household sector. Only increasing competition among banks can lead to a significant decrease in credit interest rates in Serbia in the medium term. Empirical analysis shows that competition should be most intensive on the mortgage loan market.
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Bibliographic InfoArticle provided by Savez ekonomista Vojvodine, Novi Sad, Serbia in its journal Panoeconomicus.
Volume (Year): 54 (2007)
Issue (Month): 4 (December)
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Web page: http://www.panoeconomicus.rs/
Interest rate; Foreign banks; Serbia;
Find related papers by JEL classification:
- G20 - Financial Economics - - Financial Institutions and Services - - - General
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Thomas Reininger & Franz Schardax & Martin Summer, 2002.
"Financial System Transition in Central Europe: The First Decades,"
SUERF - The European Money and Finance Forum, number 16 edited by Morten Balling.
- by Thomas Reininger & Franz Schardax & Martin Summer, 2002. "Financial System Transition in Central Europe: The First Decade," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum.
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