Cartel danger lurks in big bank system
- Source: Global Times
- [21:50 August 11 2010]
- Comments
Recently, the price hike in banking services has attracted nationwide attention and it is hotly discussed whether a banking monopoly exists.
Chen Zuofu, executive vice president of the China Construction Bank, asserted in a forum that there was no monopoly in banking industry.
Although it's true that there are many other banks apart from the four major ones, the big four still exert a decisive impact on the banking industry.
As the big four hold a major market share, if they charge more, there will be a sharp contrast in revenue between them and those who do not raise prices, especially the small-scale banks, and it will become harder for these banks to survive because of their low revenue.
As a result, these banks have to abandon their "cheap strategy" to have a chance at success.
Gradually, these domestic banks are likely to form a cartel. Then consumers will end up being charged more.
There are at least three requirements for the formation of a cartel.
First, the members of a cartel have the ability to raise prices.
Second, all the members are less likely to be punished by the government.
Third, the organizational cost of starting up and implementing a cartel agreement is relatively low.
The big four meet the three requirements perfectly.
"You can choose any bank you like; there is no problem at all", Chen said. The point is, once a cartel is formed, there will be no choice for customers but to go to a bank with expensive charges, even though there are "numerous" other banks.
Whether there is monopoly in banking industry is not judged by the vice president of a bank, but by the law. It is high time for the government to intervene in the banking industry with an anti-monopoly law.
Only in this way can citizen's rights and interests be safeguarded and the sound development of the banking industry be ensured.
Morning Express
