Competition in Hong Kong's Banking Sector: A Panzar-Rosse Assessment
A re-examination of the competitive conditions of the banking industry in Hong Kong, based on the Panzar-Rosse approach and using a panel dataset with longer time-series data, reconfirms previous findings in our RM 04/2004 that the degree of competition was fairly high during the period 1992-2002. The empirical analysis also suggests that competitive pressures have been maintained in subsequent years, notwithstanding significant changes in the operating environment. The estimation results showed that competitive pressures were higher among larger banks and lower among smaller banks. This may suggest that while larger banks compete with smaller banks keenly in local retail markets on products such as mortgages and credit cards, they may be subject to even stronger pressures from other competitors at the regional or international levels in the corporate banking market, wealth management and other off-balance sheet activities, where they are more heavily involved. While relaxation of regulations and advances in technology tend to increase competition in the banking system, the effect of consolidation may depend on the prevailing market settings. To the extent that bank consolidation in recent years may have hampered competition, regulatory liberalisation and technological progress appear to have largely offset the adverse effect. The emergence of a number of larger banks through mergers and acquisitions which should be more capable of competing with existing large banks may have also contributed. Nonetheless, with bank consolidation expected to continue, how market concentration may impact on competition in the years to come needs to be closely monitored.
|Date of creation:||Oct 2006|
|Date of revision:|
|Contact details of provider:|| Postal: 55th Floor, Two International Finance Centre, 8 Finance Street, Central|
Web page: http://www.info.gov.hk/hkma/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:hkg:wpaper:0616. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Simon Chan)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.