Banking as a branch of activity is the most important part of the financial sector of all countries. The bank requires a minimum of HRK 40 million capital to be established which can be acquired from domestic or foreign investors. Concentration is the term for those forms of aggregation such as merging and joining. A concentrated market is one where several major banks prevail and they have the power to set operating conditions. I will examine the level of market concentration using the Herfindahl-Hirschman index and the concentration index of the largest banks in the market. Foreign banking groups are investing in other markets to increase their assets and further expand their influence. The countries that emerged after the breakup of Yugoslavia are Croatia, Bosnia and Herzegovina, Slovenia, Serbia, Montenegro and Northern Macedonia. The banking of these countries is relatively underdeveloped because of the large debts they have had to repay and they were unable to recover and reach the level of developed European countries. Over the years, banking systems have consolidated and the number of banks has decreased. Although the number of banks is falling, the assets owned by them are increasing year by year. In Croatia, the number of banks in 2000 was 44, and today that number has dropped to 21. The market is highly concentrated because the four largest banks own 75% of the total assets of banks. All four largest banks in the banking market are majority foreign owned. In 2000, there were 80 banks operating in Serbia, and this number was reduced in 2001 to eliminate unnecessary costs and make it easier to repay their debts. Today the number of banks is 26, of which the four largest banks own 46% of the total assets of the banks, which means that the market is not concentrated. There are currently 12 banks operating in Slovenia and the market is highly concentrated as the four largest banks own 60% of the total assets of the banks. Bosnia and Herzegovina is divided into the Federation of Bosnia and Herzegovina and Republic Srpska, but both are controlled by the same central bank. 2 000. there were 57 banks in the banking sector, that number is down to 23 today. The market is not concentrated and it is dominated by investors from Austria, Italy and Turkey. In Northern Macedonia, the number of banks has dropped from 21 to the present 15. In Montenegro, there are 15 banks and predominantly investors from Austria, France and Hungary. In terms of concentration index values, the market is highly concentrated. At the beginning of the paper, hypotheses were made that in all observed countries, foreign owned banks dominate the market, which has been proven. The hypothesis that foreign investors manage most of the overall assets in the markets has been proven. Foreign investors help the banking markets develop and help them to modernize. Domestic investors do not have sufficient capital to compete in a market where large foreign banking groups from, for example, Austria and Italy, which are very widespread in central Europe, set the conditions. Notwithstanding the frequent negative reactions of the public to foreign ownership of banks, the fact is that competition from foreign banks has significantly influenced the confidence in the banking system.