Challenges in Banking Sector in Serbia Under Conditions of Financial Crisis

Expansion of banking sector in Serbia, the result of regulatory reforms in financial system, has been followed by increased growth of capacities, productivity and profitability. Reduction in the number of banks, strengthening of the capital base and more efficient methods of management are the main characteristics of domestic banking during the past few years. Banking sector in Serbia encountered effects of the world economic crisis which was followed by the increase in bank interest rates, all increasing difference among interest rates at which banks launched their resources and referential interest rates of the European central banks, as well as crisis in trust of the citizens in the banking sector. Reduction of domestic savings on one hand and limited and expensive sources of financing in the world on the other resulted in narrower scope of business activities and increase in prices of banking services in Serbia. In order to bring about stabilization in banking sector in Serbia, the National Bank of Serbia and the Government took over a set of measures directed mainly towards perseverance of the level of the loan activities, increase in savings and attracting foreign investments.