Given that the financial sector is bank-centric, the financial health of banks and their capacity to perform their core function of financial intermediation is key for maintaining financial stability. In this context, it is important that banks operating in Serbia largely rely on domestic, stable sources of funding.
This reduces banks’ exposure to risks stemming from the international environment, and mitigates the risk of sudden withdrawal of funds by parent banks, which was one of the challenges facing the countries in the region in the crisis period. In 2016, Serbia’s banking sector remained well-capitalised and highly liquid, with higher profitability compared to the same period last year.