The sharp fall of property prices after the Asian financial crisis has led many residential mortgage holders in Hong Kong to experience negative equity. Among other factors, this study looks at the impact of negative equity on the probability of default on mortgage loans, which is an important...

Taking large open positions in the Hang Seng Index (HSI) futures formed part of the strategy of speculators in the 1998 episode of "speculative attacks" on the Hong Kong dollar and stock markets. The open interest has risen in the past couple of years, at one point to a record high level in the...

The Hong Kong Monetary Authority has completed a research study on the setting of mortgage rate by Authorized Institutions (AIs). The purpose of the project is to consider whether in an environment of intensive competition and, until recently, abundant liquidity in the banking system, the AIs...

The large presence of global banks in Hong Kong offers a well suited empirical setting to study the capital management of foreign bank subsidiaries from a host country perspective. Specifically, this paper uses the trade-off theory of leverage to investigate whether the leverage dynamics of...

This paper develops a model to identify the major determinants of a bank's profit, and the general level of profitability of a banking market. It found that in Hong Kong's case, market structure, such as market concentration and market shares of banks, is not a major contributory factor. Cost...

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...

Residential mortgage rates in Hong Kong have fallen to a historic low level since late 2004, largely because of severe competition and the prevailing exceptionally low funding cost of the banks. Because of the abundance of liquidity in the banking system, HIBOR is at an abnormally deep discount...

This paper develops a framework for stress testing the credit exposures of Hong Kong's retail banks to macroeconomic shocks. It involves the construction of macroeconomic credit risk models, each consisting of a multiple regression model explaining the default rate of banks, and a set of...

Banks in Hong Kong generally maintain capital adequacy ratios well above the regulatory requirement. The buffers are largely determined by the internal considerations of the banks, their responses to market discipline, and the regulatory framework. Despite the presence of excess capital, banks...

The HKMA has completed a research study on the setting of mortgage rate by Authorized Institutions (AIs). The purpose of the project is to consider whether in an environment of intensive competition and, until recently, abundant liquidity in the banking system, the AIs have adequately taken into...