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Testing for Collusion in the Hong Kong Banking Sector

Listed author(s):
  • Jim Wong


    (Research Department, Hong Kong Monetary Authority)

  • Eric Wong


    (Research Department, Hong Kong Monetary Authority)

  • Tom Fong


    (Research Department, Hong Kong Monetary Authority)

  • Ka-fai Choi

    (Research Department, Hong Kong Monetary Authority)

Registered author(s):

    This working paper examines the degree of collusion in the banking sector of Hong Kong based on the conjectural variation approach. The results suggest that banks in Hong Kong operated in a competitive fashion in the loan market during the period 1991-2002 with no significant sign of collusion on pricing. The market conduct was largely maintained in subsequent years, despite significant changes in the operating conditions. While major bank consolidations in 2001-2002 have resulted in fewer banks and thus a market more conducive to develop and maintain collusions, interest rate deregulations implemented around the same time has promoted a more competitive environment. The estimation results show that while banks do not appear to have exercised any collusive pricing in either the retail market or the corporate loan market, it is relatively less likely to develop oligopolistic collusions in the corporate loan market than in the local retail market.

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    Paper provided by Hong Kong Monetary Authority in its series Working Papers with number 0701.

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    Length: 20 pages
    Date of creation: Feb 2007
    Handle: RePEc:hkg:wpaper:0701
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