PRIVATE banking in the increasingly affluent Hong Kong market has become so competitive that margins are falling and newcomers are being crowded out, finding it no longer economical to start a business. ''I have seen a famous Swiss bank opening and closing its office here in Hong Kong,'' said Louk de Wilde, managing director of the Swiss private bank Compagnie de Gestion et de Banque Gonet (COGEBA). ''It is too costly to set up an operation in this competitive market.'' But the Swiss bank would use its position in the Generale Bank group with Hong Kong-based Belgian Bank to start business in Hong Kong, he said. ''We will do it through Belgian Bank by providing a complementary service to its clients. ''That's the only way it can work,'' he said. Private banking markets had been crowded by commercial banks, which had become averse to credit risk, he said. ''Having experienced the lending disaster to less developed countries in the 1980s, the commercial property lending in the late 1980s and the recent recession, banks find private banking - which incurs only fee income without bearing credit risk - all the more attractive,'' Mr de Wilde said. The increasing number of players in the Hong Kong market had driven the margin down, to a point where growing business volume could not compensate, Mr de Wilde added. As operating costs continued to rise, he said, COGEBA would not step into the Hong Kong market alone.