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

TitleThe Efficiency of Banking Sector in Bosnia and Herzegovina in Comparison to Slovenia: Comparative Analysis
Publication TypeJournal Article
Year of Publication2012
AuthorsBico, A, Ganić, M
JournalJournal of Economic and Social Studies
Volume2
Issue2
Pagination125-149
Date PublishedJuly 2012
Abstract

This paper analyzes the banking sector's 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.