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Banks as key financial institutions have the greatest importance in the financial system, its main function is the transformation of deposits in funding. Activities pursued by modern banks often include both banking and non-banking services. For sound monetary policy is necessary to takeover key reforms and restructuring of the banking system. The banking system in the Republic Macedonia has possibilities for increasing and improving the efficiency of the banks, since the index of household loans / GDP according to we are among the last countries in transition countries. Unlike the banking systems of transition economies, the performance of the Macedonian banking system has been a trend in the improvement of banking processes and procedures. Depending on all types of loans contained in the range of products offered by banks and their functionality depends on the growth and profits of banks since the credit activity is one of the basic functions and carries the greatest profitability for banks. Borrowers apply for a loan may have various purposes. Banks create products to meet the different needs of different users. [ABSTRACT FROM AUTHOR]

Macedonian banking is basically traditional banking, therefore loans are the main sources of the banks for provision of funds. Given that the analysis of lending is very complex, the paper makes reference only to certain aspects of the lending activity of banks in the past: structure of assets in the banking sector, dynamics of lending activity and lending structure by sectors (corporate and household sector). The analysis based on all previously mentioned aspects is done for the period before and after the global financial crisis in order to see the effects of its impact on the credit activity of banks. There is an evident fact that slowing economic activity in the real sector, and tightening credit conditions by banks after 2008 conditions the existence of downward trend in the lending activity, which is evident trough the reduction of the share of loans in the assets of the banking sector, the rate of growth of gross loans, and the rate of growth of loans in the corporate and household sector. [ABSTRACT FROM AUTHOR]