Banking stability during the economic transformation process in selected countries of the Western Balkans

Economic transformation is still an ongoing process in many European countries. Despite common economic roots, the current economic situations are developing differently in different countries. This article will consider the process of economic transformation in terms of the banking sector. It aims to assess the level of banking stability throughout the transformation process in the Western Balkan region, and to assess the determinants of banking stability. A tool based on the Macroeconomic Stability Pentagon is used to estimate banking stability. The study finds that in most of the researched countries, the most common determinants of banking stability are market concentration and market competition. Additionally, it finds that the stability of banking systems in two countries–relatively the most transformed in the region (Croatia) and the one which is considered the most delayed (Serbia)–are influenced by similar factors, while the other banking systems in the region, despite common roots and experiences, vary in terms of the factors affecting their banking stability