MODERN TRENDS, FINANCIAL INNOVATIONS AND DETERMINANTS OF VARIABILITY IN BANKING OPERATIONS

Abstract

A bank is a financial institution of the monetary system that deals with taking deposits and granting loans and mediating payments. A basic feature of traditional banking in market economies in the past was the financial intermediation between the supply and demand of financial assets. According to the traditional approach, the bank performs service activities in financial intermediation, freed from the process of competition because the demand for free financial resources (loans) has traditionally been greater than the supply (deposits). Today, although very rare, this type of bank is still dominant in fully or insufficiently financially developed countries where the demand for financial assets is still greater than the supply and where there is a need for a planned distribution of limited material and financial resources in the priority areas of the economy. . In recent decades, the trends of internationalization and globalization of financial markets, the increase in the number of financial services, the involvement of non-banking institutions in the provision of banking services, as well as technological progress and the emergence of a large number of financial innovations, have caused changes in the structure of banking operations and strategies. Contemporary trends in banking include not only globalization, but also technological revolution, innovation, banking regulation and supervision, and changes in this area. The determinants of variability have changed the way banking business is conducted, both in Western developed economies and in developing economies like ours. These determinants are constantly changing, according to the needs of customers, but also of banking institutions, with the aim of greater success and profitability. The development of new financial products, that is, financial instruments in the area of the mortgage market and the derivatives market has been particularly noticeable in the last few decades. Innovations in banking practice cannot be observed only from the point of view of the development of a new banking and financial product, but it is necessary to observe the innovation of the environment, which is very important for the development of new financial instruments. The automation of banking operations and the emergence of new financial instruments and flows in the financial, monetary and banking spheres reflect the new profile of a modern bank.