Structure Financial Sector Macedonia Vs the Netherlands

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Contents

Introduction        

General Information        

Size and Structure of the Financial Systems        

Ownership Structure        

Market Concentration        

Overall Profitability        

Non-Performing Loans        

Capital Market        

Conclusion        

References        

Introduction

The recent global financial crisis has had a huge impact on the world economy. Economies of several countries has recently reached pre-crisis levels again, and are looking to further prospective growth. However many other countries are still suffering from the global financial crisis, and are trying to crawl out of financial recession. One of these countries is the Netherlands, after being hit hard by the global financial crisis, the Netherlands is trying to look forward. According the Dutch Central Bank “After two years of contraction, the Dutch economy showed in 2014 a small economic growth and the housing market is finally showing some promising numbers” (Economische Ontwikkelingen en Vooruitzichten, 2015).

As an (Dutch) international student in the Republic of Macedonia, I was interested to compare the structure of the financial system of the Republic of Macedonia with the financial system of the Netherlands. Therefore, my aim is to provide a comparative analysis between the structure of the financial systems of both countries. I have made several historical data comparisons between both countries for the years 2006 – 2013.

Among other things, I will start my small-scale research by providing some general economic information about both countries, followed by some comparison on both depositary and non-depositary institutions and its asset structure. Besides that, topics as market concentration, ownership structure, overall profitability of the financial systems and turnover ratios on the capital markets, will be discussed.

All statistical data is gathered from NBRM, DNB, IMF, World Bank, EUROSTAT, National Stock Exchanges (MSE and AEX) and the state statistical offices of both countries (CBS and STAT). All graphical presentations are created by the author based on historical data coming from the above mentioned institutions.

Note: I would advise to read this small scale research together with the PowerPoint presentation, since it shows additional graphical presentations which are not shown in this paper.

General Information

The OECD generalized the Netherlands as an “High Income Country”, where Macedonia is categorized in the group “Upper Middle Income” But what does this mean? “High income countries are those with a GNI per capita  above 12746 US Dollars, whereas upper middle income countries are those with a GNI above 4125 US dollars but less than 12746 US dollars”. (World Bank/OECD) This is correct since Macedonia’s GNI per capita was in 2014 4870 US dollars and the Dutch GNI per capita was 51060 US dollars in the same year. Besides that, the Netherlands has a population of 16.9 million and an GDP of around 850 Billion US Dollar, whereas the Republic of Macedonia has a population of 2.12 million and an GDP of 10.2 Billion US dollar.

Another huge difference can be seen in the differential between minimum wages in both countries. Dutch minimum wages (€1501,80) are more than seven times higher than the minimum wages in the Republic of Macedonia (€213,72). An interesting trend can be seen in the level of unemployment in both countries:

As you can see in the graphical presentation on the left side, Dutch unemployment levels are considerable lower than the Macedonian statistics. However we should take into consideration Macedonia’s huge grey economy! What we can make up out of this graph is that unemployment levels in the EU and the Netherlands are increasing overtime, while Macedonia is doing a good job in downsizing its unemployment problem over the last years.[pic 8][pic 9]

Credit Rating institutions as Moody’s, S&P and Fitch have recently upgraded the credit status of the Netherlands towards AAA, whereas Macedonia’s current credit rating is BB-. [pic 10]

Another significant different can be found in both countries its’ trade characteristics. Whereas the Netherlands is a significant exporter of various products, the Republic of Macedonia limits its activities mainly to importing. A logic explanation for this is the lack of resources the Republic of Macedonia has.[pic 11]

Macedonia’s banking sector is quite sound and stable over the last years. This is partly due to its low risk portfolio. So does the Macedonia banking sector score relatively good on profitability indicators and capital adequacy which are later highlighted, but does it also hold significantly more bank capital to assets as the Dutch banking system does. In my opinion, it’s a good case that the Macedonian banking sector is very sound and holds additional capital, since (as an open economy) it is strongly dependent on factors outside the Republic of Macedonia.

If we look towards the structure of the Gross Domestic Product of both countries, we can conclude that the structure is more or less the same in both countries, however a note should be taken that agricultural activities play a more dominant role in the Macedonian economy.

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Several other economic indicators have been highlighted and can be found in the attached PowerPoint presentation.

Size and Structure of the Financial Systems

As first, there is a comparison made concerning the total assets of both financial systems. At a first glance we see a huge difference between both financial systems. In 2006, the Dutch financial system counted an amount of assets of 3372 Billion Euros, where Macedonia’s asset size was more or less a thousand times smaller with 3.21 Billion Euros. [pic 16][pic 17]