THE IMPACT OF HOUSEHOLD DEPOSITS ON BANK CREDIT ACTIVITIES: EVIDENCE FROM SELECTED WESTERN BALKAN COUNTRIES

Credit activities of banks are significantly conditioned by the level of bank deposits as the main source of bank financing, especially for banks operating in underdeveloped financial markets. A notably significant part of the bank deposit base comprises household deposits, which in the banking sectors of the Western Balkan countries have a considerable share of total deposits. This paper investigates the dependence of bank lending activities on the total household deposits in the banking sectors of the Western Balkan countries. The research was conducted for the period from 2000 to 2021 for the banking sectors in Republika Srpska and the Federation of Bosnia and Herzegovina, for the period from 2002 to 2021 for the banking sector in Montenegro and for the period from 2003 to 2019 for the banking sector in Serbia. The level of total loans in banks represents the dependent variable, while household deposits in the observed banking sectors represent independent variables. This research has also opened some new directions in research work in terms of the intensity of the factors that can contribute to the growth of household deposits as a source of financing bank lending activities in the Western Balkan countries.