The Efficiency of the Banking System in the Republic of North Macedonia

The purpose of this research is to analyse the efficiency and stability of the banking system in the Republic of North Macedonia over the period 2004-2024. Using annual data from the National Bank, we estimate a linear regression model in which return on average assets (ROAA) is explained by cost-to-income ratio, employee cost-to-total-income ratio, net interest margin, and non-interest margin. The results reveal that cost-to-income and net interest margin both exert a statistically significant negative effect on profitability, whereas higher investment in human capital improves efficiency. Descriptive indicators confirm a stable system, indicating that in 2024 the capital adequacy ratio stood at 18.9 %, well above the regulatory minimum, while ROAA and ROAE reached 2.2 % and 17.6 %, respectively. Five large banks hold 82 % of total assets, and foreign capital accounts for nearly 80 % of ownership, reflecting a highly concentrated yet well-capitalised sector. Policy implications underscore the importance of further reducing operating costs and diversifying income sources to sustain profitability. Overall, the North Macedonian banking sector remains resilient, liquid, and adequately capitalized, providing a sound basis for continued economic growth.