engleski

Bank - dominated financial system and developmentof non - bank competitors: Case of Croatia

The structure and efficiency of contemporary financial systems are to a large extent determined by a diversity of financial institutions which operate in it, by their relative importance and by the type of operations there are performing. Underdeveloped systems, like those in Central and Eastern Europe, have a “ shallow” market with few financial intermediaries. Among the most important are credit institutions headed by banks. Thus the situation in financial sector, as well as the situation in the economy as a whole, is determined by the state of banking sector. Underdevelopment of non-banking competitors and securities market reproduces the dependence on bank credit financing and creates a non-competitive financial market, which, in turn, makes financial intermediation more expensive. In the last ten years transition countries have been putting effort into transforming their financial systems, while developed countries themselves have been carrying out important changes in their financial sectors. These changes are of the global nature and can be expected to occur even in those countries in which they have not been noticeable as yet, in spite of different national financial structures. One of the most important changes is a certain "demonopolisation" of banks – the importance of banks and their credit financing have lessened in favor of non-bank competitors, primarily institutional investors, and in favor of security issuing financing. Traditional "old" financial system has been undergoing transformation from a bank-dominated (bank-based) into a market-oriented (market-based) system. By analogy, transition countries, Croatia included, will also be swept by these changes of financial institutions and by adjustments of banking industry which will be done through its intensive consolidation and redesign in accordance with changes in the market environment.

financial institutions; bank-based financial system; non - bank institutions; financial conglomerates

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