Banking Sector Performance During the COVID-19 Crisis in the Republic of North Macedonia

Abstract

This paper explores the effect of the COVID-19 crisis on commercial banks in theRepublic of North Macedonia. It has used data from financial statements of the banks inorder to find out if there are changes in banks profitability, as well as banks exposureon liquidity and credit risk in the period of Corona crises and before the crises.Furthermore, we explore if there are changes in the credit and deposit potential of banksand whether there are an increase in non-performing loans. We conclude that even thebanking sector has faced several challenges, it maintained its stability and contributedto mitigation of the consequences of the corona crisis. This, on the one hand, is a resultof public confidence in the banking system, but, on the other hand is due to the rapidreaction of the National Bank of Republic of North Macedonia. In 2020, the bankingsystem made a higher profit compared to the previous year. Net interest income wasthe most significant in the structure of total income and did not decrease in 2020compared to 2019. Banks ensured solid growth of loans and deposits as well as properlymanaged their credit and liquidity risk. It is important to emphasize that banks havemaintained a stable and solid liquidity position, which is one of the main pillars of thestability of the banking system, especially important in times of crisis. There was alsono increase in credit risk, on the contrary there was a decrease in the percentage ofnon-performing loans. This is primarily due to regulatory measures taken by theNational Bank in the field of credit risk management and the introduction of thepossibility of temporary deferral of loans.