The New Challenges of the Western Balkan Banking Industry During Ongoing Global Crisis

Abstract

ABSTRACT The current energy crisis, COVID-19 pandemic and the ongoing crisis in Ukraine have been negatively affecting several channels, including energy, trade and the financial sector. As banks play the main role in all real sector business activities, it is of great importance to examine the impact of the COVID-19 pandemic and the Ukraine crisis on bank performances. Currently, banks are showing weaker profitability after the strong recovery in 2021, while the world is facing the impact of the war on energy prices, inflation and growth, which reinforces the existing vulnerabilities. This article assesses the impact of the current crisis on the financial performance of the banking sector in the Western Balkans. Our study shows that the energy and COVID-19 crisis have had a detrimental effect on the financial performance of banks in the Western Balkans. Furthermore, the Ukraine crisis will prolong and extend these negative effects on the financial stability and liquidity of the banking sector in Western Balkans.