This final thesis focuses on concentration, its advantages and disadvantages and its impact on the financial system in terms of stability, efficiency and how it affects the market structure. The final thesis also examines the influence of foreign banks on the domestic market, how they influenced the movement of the number of banks in Croatia, their advantages and disadvantages, and how they affected the concentration of banks. Concentration is a very important concept, confirmed by various studies and different economists. Concentration in the banking market is closely linked to other markets, namely that we can say that other sectors are dependent on the banking sector, and as such depend on it, because banking problems can spread to other markets. There are many indices for measuring concentration, in this paper two major ones are calculated- the concentration ratio and the Herfindahl-Hirschman index. Among others, these two indices are the most commonly used, as their results give a clear picture of the condition of market concentration. Hence, concentration is of the most importance for the functioning of the banking system, so it is necessary to monitor its movements.