Foreign Bank Penetration in ASEAN and It's Impact Toward Banking Competition

The existence of foreign banks within a country is to facilitate international trade transactions. As a consequence, foreign banks provide some breakthroughs for local companies to access worldwide financing. It means, through foreign banks, foreign companies can enter the domestic market in terms of financing, investment, or else. The purpose of this study is to measure the impact of foreign banks penetration in ASEAN countries banking industry. The impacts to be measured are limited only in terms of competition during 2002-2014. Foreign bank penetration is measured by ratio of foreign assets to total assets of banks. The level of banking competition is measured using Panzar-Rosse approach as used by Shaffer (2004) which refers to the Panzar Rosse (1987). Panel Regression method used to estimate the effect of the penetration of foreign banks on the level of banking competition. This research show that foreign bank penetration have negative relationship with bank competition im ASEAN. So, decision maker in each country have to take prudent policy in term of foreign bank penetration