HKMA throws weight behind banking alliances
The Hong Kong Monetary Authority supports further consolidation in the SAR's banking sector and believes the trend will boost the industry's competitiveness.
However, the process need not involve ownership changes if strategic alliances could achieve the same benefits, deputy chief executive David Carse said.
'One of the objectives of a merger is to reduce operating expenses,' Mr Carse said.
'If you can do that [through other forms of co-operation] by sharing the costs of computerisation or the costs of developing new products, that seems to be a very sensible thing to do.' Mr Carse's comments followed news of a possible merger of the 12 banks of the Bank of China Group (BOC) in Hong Kong and the announcement that seven other banks would form an alliance to offer Mandatory Provident Fund services.
He said all consolidation moves should be driven by commercial considerations, based on the judgment of individual banks' management.
Unlike banks in Korea and Thailand, those in Hong Kong in general were still in a reasonably good financial position, Mr Carse said.
He did not think financial or capital strength enhancement would be a significant incentive for bank mergers.
Bankers agreed, saying they believed the MPF alliance would set a precedent for co-operation in other areas.
Union Bank of Hong Kong, which was not part of the alliance, was considering co-operating with other partners on MPF services.
Managing director and chief executive David Yau Man-tak said the bank was considering distributing MPF products offered by other financial institutions through its branch network.
'I think there will be more strategic alliances among the local banks, following a similar trend overseas.' He did not see such alliances developing into full-scale mergers because a majority of local banks were owned by families, which tended to be reluctant to sell.
Hongkong Chinese Bank managing director and chief executive Raymond Lee Wing-hung said alliances appeared an easier option because no realignment of corporate cultures and management styles was involved.
Mr Carse said that while the HKMA had not yet received any specific proposal on the BOC Group's restructuring, in general he thought the merger was 'sensible'.
As only four of the 12 banks were incorporated in Hong Kong - the others were in the mainland - the potential merger raised questions over how the combined group would be regulated.
'There are different ways the restructuring can be done . . . the main thing is to ensure that there is adequate supervision,' Mr Carse said.
Carse backs law on supervision, Page 3
