Organizational forms of foreign direct investment in banking sector of Serbia

Ljumović, Isidora and Cvijanović, Janko (2014) Organizational forms of foreign direct investment in banking sector of Serbia. In: International Thematic Proceedings Possibilities and Perspectives for Foreign Direct Investments in the Republic of Serbia. Institute of International Politics and Economics, Belgrade, pp. 341-356. ISBN 978-86-7067-204-8

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Abstract

Globalization and liberalization of financial markets led to a dramatic increase in the presence of foreign banks in many countries, especially in transitional ones. For small open economies, without adequate sources of domestic savings, foreign direct investment and a healthy financial system that has capacity to support these investments are of vital importance for creating preconditions for future economic growth. In the last decade foreign direct investment in banking sector of Serbia, have changed the banking landscape and triggered important changes in the banking system structure. This paper presents the discussion about the organizational forms of banks related to the entry of new banking capital in the form of foreign direct investments. There are many reasons and theories related to the internationalization of banking sector. Following the decision to entry a new foreign market, each bank must choose organizational form. Throughout history, there have been various solutions that have been applied by banks in terms of their organizational form for the expansion. Usually three factors are considering when determining form of organizing. First factor is type and volume of bank business operations, second is the need for employing resources, and the third is regulatory framework. In economic theory, banks can be organized as correspondent banking, representative offices, agencies, subsidiaries and branches, while in Serbia this choice is narrowed.

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