Mainland banks seizing more business from Hong Kong banks

Chinese banks are becoming more aggressive, said Fitch Ratings.

A report by the ratings agency also said other foreign banks are also aggressively expanding in Hong Kong. Chinese and foreign banks account for some 95% of the Hong Kong banking system and continue to invest in the city.

Mainland banks have significantly increased their market share in Hong Kong to about 15% of system-wide assets at the end of the first half in 2012 from 9% in 2009.

Fitch said the domination of Hong Kong by foreign banks makes system-wide liquidity vulnerable to stress in other banking systems and economies. The system's cross-border claims and liabilities accounted for 51.4% and 37.7%, respectively, of total assets/liabilities by September.

Fitch said foreign banks may see small Hong Kong banks as takeover targets that enable them to boost market share. It noted that mainland banks will continue to expand and use their Hong Kong operations as offshore banking platforms to source United States and Hong Kong dollar funding.