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Testing for Collusion in the Hong Kong Banking Sector

Author

Listed:
  • 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)

Abstract

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.

Suggested Citation

  • Jim Wong & Eric Wong & Tom Fong & Ka-fai Choi, 2007. "Testing for Collusion in the Hong Kong Banking Sector," Working Papers 0701, Hong Kong Monetary Authority.
    • Handle: RePEc:hkg:wpaper:0701
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    File URL: http://www.info.gov.hk/hkma/eng/research/working/pdf/HKMAWP07_01_full.pdf
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    Citations

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    Cited by:

    1. Wei-Hsiung Wu, 2008. "The Second Financial Reform and the Development of Financial Industry in Taiwan," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 11(01), pages 75-97.
    2. Chun-Yu Ho, 2010. "Deregulation, competition and consumer welfare in a banking market: evidence from Hong Kong," Journal of Regulatory Economics, Springer, vol. 37(1), pages 70-97, February.
    3. Ledenyov, Dimitri O. & Ledenyov, Viktor O., 2015. "Wave function method to forecast foreign currencies exchange rates at ultra high frequency electronic trading in foreign currencies exchange markets," MPRA Paper 67470, University Library of Munich, Germany.

    More about this item

    Keywords

    Conjectural variation; price; Hong Kong banking; market structure;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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