Structure Financial Sector Macedonia Vs the Netherlands

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More important and interesting to see is the growth of the total assets of both financial systems. Where the Netherlands has negative growth numbers after the financial crisis, Macedonia’s asset growth is significant over the years. Hereby should be taken into consideration that the Republic of Macedonia is an emerging economy and therefore generally scores higher growth rates than established developed countries.

Year

Netherlands

Macedonia

2006

470%

49%

2007

467%

51%

2008

504%

60,9%

2009

462%

65,4%

2010

462%

70,3%

2011

473%

72%

2012

448%

76,9%

2013

433%

80% (EST)

Figure 6 Total Assets Financial System as % of GDP

In the table on the right side, the total assets of the financial systems as percentage of GDP are mentioned. While the Dutch financial system is facing serious troubles after the financial crisis, Macedonia’s financial system is growing steadily. As the CBS report on the Dutch financial system states, “The Netherlands had a big and important financial sector before the credit crisis (crunch), but the collapse of the Lehman Brothers has resulted in a couple of nationalization events of previously private owned banks in the Netherlands such as ABN AMRO, Fortis and SNS Reaal. Besides that, other big players as ING and AEGON were assisted by the Dutch state. In addition, this critical events have significantly reduced the confidence in the financial system, and this confidence is still not completely restored” (Leslie Nootenboom, 2014) However, the annual report of the Dutch central bank (published in 2015) showed that after three years of contraction, the amount of total assets in the financial system has slightly grown. Therefore, they hope that this is the basis for further development and growth of its national financial system.

Secondly, we have analyzed the asset structure of both financial systems. There are several notable differences between both countries regarding its financial asset structure. In both countries, the banks hold the biggest share of assets, however the difference is in the importance of the non-depository institutions in both countries. In the Netherlands, the insurance and pension companies hold a significant part of the assets (+/-35%) whereas in Macedonia, the non-depository institutions (including leasing, pension, insurance, brokers and private equity firms) hold only 10% of the total assets of Macedonia’s financial system (the graphical presentation can be found in the PowerPoint presentation).

As third indicator, we have analyzed the number of financial institutions in both countries. First, we will take a look towards the situation in the Netherlands:

The amount of financial institutions have significantly dropped over time, this is both due to the merger and acquisition trend, and the financial crisis: from 1240 financial institutions in 2006, the amount of FI’s in 2013 are only 681. If we take a closer look we can see that especially the number of pension fund companies have significantly declined with around 50%. The amount of banks and insurance companies have declined about a third. The graphical presentation can be found on the next page.

The situation in the Republic of Macedonia is notable different. Whereas the number of Dutch financial institutions are declining over time, the number of financial institutions in Macedonia are growing over time. What we see is that although the amount of banks have declined, the amount of non-depository institutions such as insurance and pension fund companies (and others) have almost quadrupled over the last seven year. The graphical presentation can be found on the next page.

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Ownership Structure

The ownership structure of the Netherlands is quite unique because 92% of all its banking assets in the Dutch economy is accruing from domestic credit institutions. This is mostly due to the fact that the Netherlands is home to a couple very large banks: the ING group, Rabobank and ABN AMRO. Only 8% of the total banking assets is coming from foreign subsidiaries and branches.

In the republic of Macedonia, around 75 – 80% of the total assets are foreign owned, whereby only 20-25% is held by domestic shareholders. “The three largest banks - Komercijalna Banka, Stopanska Banka Skopje (National Bank of Greece is the main shareholder) and NLB Tutunska Banka (NLB Group is the main shareholder) dominate in the banking system, holding together more than 60% of the total market activities. Behind these three large banks, the market is still highly fragmented but it has undergone a significant transformation over the past two years and a majority of the local banks having been acquired by foreign investors. The most recent transactions were the acquisition by Demir-Halk Bank (Nederlands) over 60% of the shares of Export and Credit Bank AD Skopje and by Steiermaerkische Bank und Sparkassen AG, from Austria of 100% of the shares in Investbank AD Skopje” (Price Water House Coopers)

Market Concentration

The next topic I have covered is about the market concentration in both countries. Instead of using the herfindahl-hirschman index, I have used a more simplified method to measure market concentration in the overall financial system: CR5. The CR5 method measures the share of total assets of the overall financial sector held by the five largest credit institutions. [pic 22]

What we see is that the financial