Original scientific paper
Autor: Prof. dr Žarko Lazarević
JEL: G21, N23, N24

Summary: Modern forms of banking started to appear towards the end of the 17th and in the early 18th century. From then on, development of banking can be divided into three main eras. The first one lasted until the final decades of the 19th century and can be designated the era of “rural banks”. A multitude of small banks, as the large ones had not yet spread their branch networks out wide, met the credit demand on local monetary markets within individual regions and towns. The second era began prior to the end of the 19th century and lasted until the 1960s. This was an era of structural and market consolidation. During this period, large banks managed to set up wide domestic branch networks, as well as to play active roles abroad. In this manner, they were confining the space at home in which small banks, which had been predominant in the preceding era, were operating. Smaller banks were thus forced either to join forces or to join larger and stronger competitors. The third era began in the second half of the 20th century, as banks were forced to undergo restructuring, with some of the large ones becoming global banks. During this period, banks witnessed increased competition on their home ground because of liberalisation and deregulation of banking business at the international level. British market was entered by foreign banks as well, specially regulating banks, the so-called “trustee savings banks” were reinforced by mutual connections and, in the case of England, the deposit market was infused by numerous construction companies whose primary business were mortgage loans and which gradually evolved into almost true commercial banks. At the same time, outstanding deepening and broadening of banking business with residents and expansion of other banking activities in the realm of the so-called investment banking took place.

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