The trend of consolidation of banks in Serbia continues as a result of global processes within banking groups, and the number of banks is decreasing year by year, mainly due to mergers. There were 84 banks operating in the former FRY, of which 74 were in Serbia. In the past twenty years, the number of banks has decreased by about 50 until now. However, it is believed that the number of banks will be further reduced in the coming years, and currently 20 are operating in Serbia.
Experts believe that the citizens, who are increasingly receiving messages from their banks about the change of their owner, should not be afraid of the entire process of merger, because there will not be any big changes for them.
Banks are obliged to inform their clients and users of their services in advance about changes, such as the takeover of banks, about what is happening and how the process of merging banks will proceed.
“What is most important for clients, for example those who are loan beneficiaries, is that nothing in their relationship with banks will change because banks that take over others are obliged by law to maintain existing business conditions towards existing clients, until the moment the expiration of their financial obligations,” Mihajlo Gajić, an economist from the Libek organization, told Euronews Serbia.
In other words, as stated by Gajić, until the end of the loan repayment, everything remains as it was in the agreement with the previous bank, nothing can be changed, unless it changes for the better for the loan beneficiaries. Gajić says that banks operate in such a way that clients do not even notice that there has been a change.
“You will see that your bank has a different logo on its entrance. If you only have account maintenance, there may be minor changes, but let’s say if you are a credit user as you signed the first contract, it will remain so until the end of its repayment. This is actually the most important thing for bank users, in some cases there may be an update or download of a new version of the mobile app as it changes to integrate different online payment services, but this is probably the biggest item that most people will people will be able to notice in their relationship with the bank,” says Gajić.
He explained that sometimes the mobile application used for online payment must be changed and that bank clients must know in advance what is happening. Asked what changes may occur in connection with payment applications, Gajić stated that it depends from bank to bank because, as he explains, some banks have to integrate their systems that were developed on completely different platforms, so it is a difficult and serious job. . According to him, earlier there were complaints from the clients of some banks regarding the changes related to the applications, but in the end it turned out that everything can be solved.
“Let’s say, it was the takeover of some banks during the previous year, which did not have the best results in the short term, but now those applications are functioning as they should again. In some cases, it was necessary to download a new version of an existing application from Play Store or if you are a customer of a bank that switched to another, you would have to install a whole new app from the play store, in some cases you even had to go to that bank in person to get them to help you with the token setup, so that mobile banking could work or something like that.
But those processes are quite easy, painless, fast and efficient,” says Gajić.
The banking market is ripe for consolidation
According to data from the website of the National Bank of Serbia, 20 banks are currently operating in Serbia. Their number is decreasing year by year because smaller banks are being merged into larger ones through mergers. For example, at the end of 2019, a total of 26 banks were operating on the Serbian banking market, eight less than in 2009. Experts believe that the market dictates consolidation.
“The banking market is ripe for this type of consolidation for the simple reason that banking is a bit more expensive than it was in previous years, and at the same time it is less profitable because the environment and the saturation of the market on the one hand, creditworthiness on the other hand, are somehow putting pressure on all the costs of banks , that’s why there is a consolidation, but that has no essential importance for clients,” Dušan Uzelac, editor of the Kamatic magazine, told Euronews Serbia.
The former governor of the National Bank of Serbia, Dejan Šoškić, also sees the reasons for consolidation in the size of the Serbian market. He states that the Serbian financial system is relatively small and that the financial services provided by larger banks to citizens and the economy can potentially be cheaper. He also believes that citizens could also benefit from the merger of banks.
“The Serbian financial system is relatively small and it is not logical that there are too many banks because then their very existence in such a large number prevents some efficiencies that can come from the economy of scale, when one bank is bigger, it can reduce certain costs and the way the financial services it provides for the economy and the population are potentially cheaper,” said economics professor Dejan Šoškić to Euronews Serbia.
On the other hand, he points out that a balance would have to be found in order to avoid a situation where large banks collude with each other and thus create a monopoly.
Consolidation according to Uzelec will not change the current situation much.
“It somehow happened until now, because this was a quasi-competitive market, because a couple of banks dominated with over 60 percent of the market, it was spread over only a couple of banks, and the rest was divided among some smaller banks.” , said Uzelac.
The merger of banks, Šoškić believes, should not be feared and in this whole business one should pay attention to who the owners of the banks are, but also that they should not be exclusively from the EU, but from several countries.
“It’s good to have some other banks, so it’s not bad to have a state bank that can sometimes not only compete with private banks with owners from abroad, but also in some way be more present in the domain of implementing some economic policies in the context of lending.” , said Šoškić.
Bad experiences with banks are a thing of the past
The way our banks operate is in the exclusive domain of the regulation of the National Bank of Serbia, said Mihajlo Gajić and explained that the rules that exist in Serbia do not differ much from the rules in the EU itself because Serbia uses international standards. He adds, he is most interested in how banks function, whether they are liquid and solvent, as well as whether they will continue to operate.
“Serbia has already had several bad experiences with banks, but they were exclusively state-owned banks that failed due to poor risk management, which was influenced by political factors, when the state appointed management, which then actually looks more at what the party in power more suitable, and not what is good for the banks themselves, they gave loans without good elements of insurance.
Those banks failed, the repayment of the deposits of clients who disappeared actually fell on the state budget. That was around 2012, when about one billion was spent euros to save those banks, which were then shut down. There is a serious problem in that domain, but it resolved itself because the state banks failed and now the state owns only two or three smaller banks that are specialized either in transactions or in the financing of dedicated industry , so we no longer have those risks like we did a few years ago,” said Gajić.
Gajić states that he could say that the National Bank of Serbia is very conservative, that it is very difficult to change established ways of doing business. Gajić noted that the economy complains a lot about the rather restrictive Law on Foreign Exchange Operations, which he says hinders the development of the ICT sector, for example, in the domain of startup companies.
“Banks must apply such regulations. You must, for example, report every foreign currency inflow from abroad so that it would first go to a special account, so when it is transferred, it only then comes to your bank account, instead of it happening quickly and automatically , that we don’t have such difficulties in doing business. Therefore, people will often blame the banks for various types of slow, inert regulations and the way in which they operate, but in fact the banks are not to blame for that, but rather the regulatory regulations prescribed by the National Bank of Serbia,” said Gajić.
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