Financial intermediation in Serbia: Alternatives for economic growth acceleration

• Main Author: Begović Boris
• Format: Article
• Language: English
• Published: Association of Serbian Banks 2017-01-01
• Series: Bankarstvo
• Subjects: financial intermediation; financial system; economic growth; regulation; banking system
• Online Access: http://scindeks-clanci.ceon.rs/data/pdf/1451-4354/2017/1451-43541702014B.pdf

The aim of the paper is to explore whether there is a fundamental alternative to the incumbent pattern of financial intermediation that can accelerate the economic growth of Serbia. The main insights that the analysis is based on are: (1) the level of financial intermediation in Serbia is still very low and very far from the level at which the diminishing or negative returns to the economic growth can be feasible, (2) the domestic financial system is to the great extent integrated into the international one, enabling the low domestic savings rate to be overcome as one of the main limiting factors of the economic growth, and (3) the regulation of the domestic financial system is compatible with the European regulation. Four alternatives to the existing system were examined. The first alternative, an accelerated built-up of nonbanking financial system is not feasible, regardless of whether it is desirable. The two other alternatives, i.e. the withdrawal of the domestic financial system from the international one and its robust ex post regulation are not desirable due to the numerous adverse consequences to the economic growth that they would produce. The remaining desirable solution is the evolution of the incumbent system, based on the moderate ex ante regulation and gradual development and strengthening of nonbanking financial intermediation.