The banking sector in Hong Kong : competition, efficiency, performance and risk / edited by Hans Genberg and Cho-Hoi Hui.

Format:

Book

Contributor:

Genberg, Hans.

Hui, Cho-Hoi.

Series:

Palgrave Macmillan studies in banking and financial institutions

Language:

English

Subjects (All):

Banks and banking--China--Hong Kong.

Mortgage loans--China--Hong Kong.

Financial risk--China--Hong Kong.

Financial risk.

Mortgage loans.

Banks and banking.

China--Hong Kong.

Physical Description:

xxv, 280 pages ; 23 cm.

Place of Publication:

Basingstoke [England] ; New York : Palgrave Macmillan, 2008.

Summary:

This book provides a comprehensive discussion of issues related to the structure and stability of the Hong Kong banking sector, using economic theory and advanced empirical econometric techniques. It is particularly useful for readers who are interested in studying, and learning how to assess, the efficiency, competition, and performance, as well as the risk and capital adequacy aspects of a banking sector in general, and of the Hong Kong banking industry in particular. Recent developments in the industry are covered, providing up-to-date information on the sector, including the market structure and risk management.

Contents:

Part I Competition, Efficiency and Profitability 1

1 The Cost Efficiency of Commercial Banks in Hong Kong / Jim Wong, Tom Pak-Wing Fong, Eric Tak-Chuen Wong, Ka-Fai Choi 3

1.2 Methodology 4

1.3 Data and estimation methods 6

1.4 The inefficiency estimates 8

1.5 Efficiency, bank characteristics and macroeconomic conditions 10

2 Competition in Hong Kong's Banking Sector: A Panzar-Rosse Assessment / Jim Wong, Eric Tak-Chuen Wong, Tom Pak-Wing Fong, Ka-Fai Choi 17

2.2 The Panzar-Rosse approach 18

2.3 The empirical specifications 19

2.4 Data and estimation methods 22

2.5 Estimation results 24

3 Testing for Collusion in the Hong Kong Banking Sector / Jim Wong, Eric Tak-Chuen Wong, Tom Pak-Wing Fong, Ka-Fai Choi 32

3.2 The conjectural variation approach 33

3.3 The empirical specifications 36

3.4 Data and estimation methods 39

3.5 Estimation results 39

4 Determinants of the Performance of Banks in Hong Kong / Jim Wong, Tom Pak-Wing Fong, Eric Tak-Chuen Wong, Ka-Fai Choi 50

4.2 Literature review 51

4.3 The empirical specification 53

4.4 Data and estimation method 56

4.5 Estimation results 58

Appendix 4A Measures of scale inefficiency 62

Part II Interest Rate and Default Risks in the Mortgage Market 67

5 Interest Rate Risk in the Pricing of Banks' Mortgage Lending / Jim Wong, Laurence Kang-Por Fung, Tom Pak-Wing Fong, Cho-Hoi Hui 69

5.2 Narrowing of spread during the tightening phase of interest rate cycle 71

5.3 Shift in risk premium 72

5.4 Potential reduction in interest rate margins 74

Annex 5A Effective mortgage rates 82

Annex 5B Test of lead-lag relationship between LIBOR and BLR 83

Annex 5C Graphical illustration of the narrowing of interest spread between BLR and HIBOR during the tightening phase of an interest rate cycle 84

Annex 5D Cointegration and error correction model 85

Annex 5E Model specification and estimation results 86

6 Hong Kong Mortgage Rate Setting - An Alternative Reference Rate? / Jim Wong, Cho-Hoi Hui, Laurence Kang-Por Fung 95

6.2 Overseas experience 97

6.3 Possible alternative reference rates: an evaluation 97

Annex 6A Reference rates for pricing mortgage loans in the US, UK and Australia 113

Annex 6B A technical note on the construction of the effective deposit rate and the composite rate 115

Annex 6C Relative features of alternative reference rates 122

Annex 6D A quantitative assessment of the approximation of alternative reference rates as a measure of average cost of funds 123

Annex 6E Simulation of interest margin for the loan portfolio acquired in January 1999 under the scenario of different reference rates 127

7 Residential Mortgage Default Risk in Hong Kong / Jim Wong, Laurence Kang-Por Fung, Tom Pak-Wing Fong, Angela Sze 132

7.2 Theoretical background and literature review 133

7.3 Methodology and data 134

7.4 The model and estimation results 138

7.5 Default probability and the level of CLTV 141

7.6 Estimated default probability and macro variables 141

7.7 The 70 per cent LTV ratio and asset quality 146

Annex 7A Estimation results for initial model specification with the CLTV ratio and CDSR as core variables 149

Annex 7B Estimation results for initial model specification with the CLTV ratio and mortgage rate (as a proxy for CDSR) as core variables 150

Annex 7C The derivation of the relationship between default probability and the CLTV level 151

Part III Quantifying Risks, Capital Adequacy and Stress-Testing Framework of Systemic Risk 157

8 Determinants of the Capital Level of Banks in Hong Kong / Jim Wong, Ka-Fai Choi, Tom Pak-Wing Fong 159

8.2 Possible determinants of capital holdings of banks 160

Annex 8A A quantitative analysis of determinants of bank capital in Hong Kong 172

Annex 8B Details of the survey results 176

9 Benchmarking Model of Default Probabilities of Listed Companies / Cho-Hoi Hui, Eric Tak-Chuen Wong, Chi-Fai Lo, Ming-Xi Huang 191

9.2 Structural model of term structures of PDs 194

9.3 Benchmarking process 198

9.4 Data and empirical results 200

10 Measuring Provisions for Collateralized Retail Lending / Cho-Hoi Hui, Chi-Fai Lo, Eric Tak-Chuen Wong, Po-Kong Man 214

10.2 Model for measuring provisions 220

10.3 Empirical analysis 223

10.4 Numerical results 229

11 A Framework for Stress Testing Banks' Credit Risk / Jim Wong, Ka-Fai Choi, Tom Pak-Wing Fong 240

11.2 Elements of stress test and the common methodology 241

11.3 The framework 242

11.4 The model and estimation results 246

11.5 The simulation of future credit losses and stress testing 248

11.6 A stress test for banks' mortgage portfolio 253

12 Assessing the Risk of Multiple Defaults in the Banking System / Ip-Wing Yu, Laurence Kang-Por Fung, Chi-Sang Tam 261

12.2 Methodology and data 262

12.3 Empirical results 266

Appendix 12A Technical details for deriving the default probability based on the structural approach 271.

Notes:

Includes bibliographical references and index.

ISBN:

0230202667

9780230202665

OCLC:

222250607

Online:

Contributor biographical information

Publisher description