THE IMPACT OF THE COVID-19 CRISIS ON BANKING MARKET CONCENTRATION AND COMPETITION IN THE WESTERN BALKANS

This paper analyzes the impact of the COVID-19 pandemic crisis on the structure of the banking market, with a specific focus on concentration levels and competition intensity within the banking sector of Western Balkan countries. Both competition and concentration are critical factors that significantly affect not only the profitability and operational efficiency of banks but also have extensive implications for macroeconomic trends and the overall stability of the financial system. The primary objective of this research is to identify key trends and structural changes in the market due to the COVID-19 crisis, using three relevant indicators: The Concentration Ratio (CR), the Entropy Index, and the Herfindahl-Hirschman Index (HHI). The findings will provide significant information for bank management, aiding in timely decision-making and strategic adjustments in response to future crises, thereby enabling more effective risk management and preservation of competitive market positions. This study is based on an empirical analysis of balance sheet data from all commercial banks in the region, covering the period from 2019 to 2022, which includes pre-crisis, crisis, and post- crisis phases. The results aim to contribute to the broader understanding of how systemic shocks like pandemics reshape banking structure dynamics and inform policymakers in designing measures to enhance financial sector resilience.