Volume 03 Issue 09-2023
45
International Journal Of Management And Economics Fundamental
(ISSN
–
2771-2257)
VOLUME
03
ISSUE
09
P
AGES
:
45-50
SJIF
I
MPACT
FACTOR
(2021:
5.
705
)
(2022:
5.
705
)
(2023:
7.
448
)
OCLC
–
1121105677
Publisher:
Oscar Publishing Services
Servi
ABSTRACT
The article describes the essence and functions of the assessment of competition between commercial banks, the
features of the organization of banking services in the interbank market. A scientific proposal and practical
recommendations on improving competition in commercial banks of our republic have been developed
KEYWORDS
Competition, banking, banking market, pandemic, Herfindahl-Hirschman, credit, concentration.
INTRODUCTION
Ensuring food and energy security is an important task
due to the ongoing complex pandemic and the
consequences of the global economic crisis, various
disturbances and conflicts in the world, the
development of the banking system, the wide use of
information technologies for bringing banking services
to the market, the introduction of the latest technical
tools and advanced banking technologies, as well as
the assessment of competition between banks are
important issues. Therefore, it is necessary to
introduce more improved models of competition
between banks. In the "Development Strategy of New
Uzbekistan for 2022-2026" [1] approved by the Decree
of the President of the Republic of Uzbekistan dated
January 28, 2022 No. PF-60 It is set to reach 60 percent.
Based on this, it should be noted that the reduction of
commercial banks with a high share of the state leads
to further improvement of competition in the
interbank market. However, the measures used to
ensure interbank competition and put an end to
Research Article
THE WAYS OF ASSESSING COMPETITION BETWEEN COMMERCIAL
BANKS
Submission Date:
September 20, 2023,
Accepted Date:
September 25, 2023,
Published Date:
September 30, 2023
Crossref doi:
https://doi.org/10.37547/ijmef/Volume03Issue09-07
Donyor R. Niyozmetov
Researcher, Khiva District Treasury Service Department, Uzbekistan
Journal
Website:
https://theusajournals.
com/index.php/ijmef
Copyright:
Original
content from this work
may be used under the
terms of the creative
commons
attributes
4.0 licence.
Volume 03 Issue 09-2023
46
International Journal Of Management And Economics Fundamental
(ISSN
–
2771-2257)
VOLUME
03
ISSUE
09
P
AGES
:
45-50
SJIF
I
MPACT
FACTOR
(2021:
5.
705
)
(2022:
5.
705
)
(2023:
7.
448
)
OCLC
–
1121105677
Publisher:
Oscar Publishing Services
Servi
monopolistic activities of banks differ significantly
from one another in the countries.
Review of literature on the subject
Different approaches can be analyzed based on the
conclusions of scientists who have conducted research
in this field. In particular, the concept of competition is
different, it is formed on the basis of supply and
demand. Supply and demand in the market are taken
as the main criteria and the main factors determining
the level of competition. Therefore, the concept of
statistical equality is based on the optimal point of
competition [2]. According to this theory, competition
is a statistical determinant and financial institutions
participating in the market will not sell products at high
prices and profit levels will not be as high as they
predict. In contrast, Austrian schoolteachers argued
that competition should be a factor determined on the
basis of struggle. One of the founders of this school,
Cournot, was one of the first to substantiate the need
for free competition in the market and the
development of competition on this basis.
Competition is a concept that defines a market
situation in which the price on the market is
determined freely and is practically equal to
production costs. To achieve a competitive market, it is
necessary to have a number of proposals, which should
not take into account the number of competitors in the
market at all; it is necessary to create free entry and
exit to the market [2]. Among the scholars who have
taken a theoretical approach to competition are
Edgeworth, Jevonsom, Walrasom, Marshall and Clark.
In their published work, “Risk, Uncertainty and Profit,”
it is noted that perfect interbank competition is the
main factor in the fight against monopoly[3]. As we
know, under the conditions of monopolistic
competition, financial institutions establish their
dominance in the market by controlling the price.
There are different views on the basis of the statistical
theory of oligopoly, and this theory makes it possible
to change the structural structure of the market.
Oligopoly theory presents the market structure,
perfect competition, imperfect competition and
monopoly. Competitions in this form are based on
different concepts, and their correct interpretation in
the marke-t is important for enterprises and
organizations. The core of competition is definitely the
financial institutions participating in the market and
their position in the market. The process of interbank
competition is created on the basis of a certain
mechanism, and its participants are considered as its
important principle [4]. According to the author, the
relationship between people plays the main role in the
competition, but other scientists believe that everyone
participates in the competition[5].
Economist in this field from the scientists of our
republic T.I. Bobakulov[6] puts forward the following
opinion as an important factor of interbank
competition: "...in the current environment, where a
healthy interbank competition environment has not
been formed, the implementation of an open market
Volume 03 Issue 09-2023
47
International Journal Of Management And Economics Fundamental
(ISSN
–
2771-2257)
VOLUME
03
ISSUE
09
P
AGES
:
45-50
SJIF
I
MPACT
FACTOR
(2021:
5.
705
)
(2022:
5.
705
)
(2023:
7.
448
)
OCLC
–
1121105677
Publisher:
Oscar Publishing Services
Servi
operation by the Central Bank of our republic with one
or two banks will create a favorable and uneven
competitive environment for these banks" causes.
Economist Sh.Z. Abdullaeva [7] emphasizes that "... in
the conditions of fierce competition, one of the main
directions of the activity of commercial banks is
investment activity".
ANALYSIS AND RESULTS
The development of competition in banking activity
was recognized as a high indicator. Interbank
competition depends on many factors, it is
fundamentally different from the formation of
competition in other markets and requires a careful
approach.
The first form of assessment of competition between
banks is an empirical approach called "Structure-
Conduct-Performance (SCP)".
This approach is considered as a paradigm for
assessing the level of competition of banks in the
market. In this case, it is based on the conclusion that
the high concentration in the market ensures the high
level of competition of the banks and consequently
increases their income (increases the Lerner index).
Therefore, in determining competition between banks,
high market concentration is considered to be
sufficient. As a justification of the fact that this
situation is true, scientists have studied it in their
research
entitled
"Bank
Concentration
and
Performance". In their opinion, they showed that the
competition is not related to the high concentration of
the market position, but to the high profitability of the
banks.
Figure 1. Algorithm of the relationship between competition among banks, stability of banks and economic
growth.[8]
Volume 03 Issue 09-2023
48
International Journal Of Management And Economics Fundamental
(ISSN
–
2771-2257)
VOLUME
03
ISSUE
09
P
AGES
:
45-50
SJIF
I
MPACT
FACTOR
(2021:
5.
705
)
(2022:
5.
705
)
(2023:
7.
448
)
OCLC
–
1121105677
Publisher:
Oscar Publishing Services
Servi
The models mentioned above show the need to assess the competition of banks in the market, taking into account
certain factors. Today, the development of banks' activities in the market does not allow us to assess their position in
the market based on some factors..
In world practice, the Herfindahl-Hirschman median value index is used to monitor competitive advantage in the
market. An overview of this index is as follows:
2
2
2
2
1
...
n
S
S
S
H
+
+
+
=
2
2
2
2
1
...,
,
n
S
S
S
these are firms operating in the market (here, organizations with a high market share of the
analyzed indicators are taken in the first place). According to scientists, competition in the market is strong when
X<1000, moderate competition between 1000<X<1800 and 1800<X indicates that the market is dominated by
monopolistic process.
Let's analyze B5 commercial banks of our republic based on their credit indicators and market share. The table below
shows the share of B5 banks in total loans.
Table 1
Share of B5 commercial banks in total loans[9]
Commercial banks
2015 y.
2016 y.
2017y.
2018 y.
2019 y.
2020 y.
Uz industrial construction
bank
14,9
10,7
8,0
8,7
6,1
22,8
Agrobank
16,9
13,7
11,8
14,8
13,6
11,7
National bank
25,2
20,8
17,4
14,9
23,1
15,5
Аsaka
bank
11,3
9,4
9,2
10,4
14,9
9,1
Ipoteka bank
11,3
9,5
10,3
9,1
10,8
9,8
Total
54,3
43,5
39,3
57,9
68,5
68,9
The share of the National Bank is high compared to other banks, it was 25.2% in 2015, and it can be observed that it
will decrease in the following years. The occurrence of this situation can be attributed to the strengthening of the
Volume 03 Issue 09-2023
49
International Journal Of Management And Economics Fundamental
(ISSN
–
2771-2257)
VOLUME
03
ISSUE
09
P
AGES
:
45-50
SJIF
I
MPACT
FACTOR
(2021:
5.
705
)
(2022:
5.
705
)
(2023:
7.
448
)
OCLC
–
1121105677
Publisher:
Oscar Publishing Services
Servi
position of other banks in the market. In particular, it can be observed that the share of Uz industrial construction
bank in 2020 increased by 3.5% compared to 2019. This is estimated by a sharp increase in the volume of loans to the
construction sector of the bank.
Based on the obtained analysis, we will analyze using the Kherfindal-Hirshman index formula to evaluate the level of
competition based on the indicators of B5 banks of our republic. Based on the above formula, we calculate the HHI
index for each year. In particular, we find the share of B5 banks in loans in 2015 as follows:
1396
3
.
11
*
3
.
11
3
.
11
*
3
.
11
2
.
25
*
2
.
25
9
.
16
*
9
.
16
9
.
14
*
9
.
14
...
2
2
2
2
1
=
+
+
+
+
=
+
+
+
=
n
S
S
S
H
Similarly, we calculate for the remaining years. As a result, we get the following table.
Index
indicator
2015 y.
2016 y.
2017 y.
2018y.
2019 y.
2020 y.
As part of general loans
HHI
1396,0
918,2
695,4
706,9
1093,8
1076,9
Market
condition
Average
competition
Strong
competition
Strong
competition
Strong
competition
Average
competition
Average
competition
based on the obtained results, the market situation of
B5 banks of our republic according to 5 indicators was
as follows: - in terms of the composition of total loans,
the market concentration is high, and in 2019, 2020, the
competition of banks has maintained an average
condition;
Conclusion
In conclusion, It is important for banks to complete the
following in order to ensure their superiority in the
competitive market:
-
increasing adaptability and effectiveness in the
market;
-
automation of the banking sector;
-
use of new computer technologies, creation of
new innovative services and service improvement;
-
further improvement of the remote service
system, increasing the possibility of internet
banking;
-
using new information and communication
technologies based on the introduction of
electronic marketing;
-
a sharp reduction in the number of banks with a
state share.
Volume 03 Issue 09-2023
50
International Journal Of Management And Economics Fundamental
(ISSN
–
2771-2257)
VOLUME
03
ISSUE
09
P
AGES
:
45-50
SJIF
I
MPACT
FACTOR
(2021:
5.
705
)
(2022:
5.
705
)
(2023:
7.
448
)
OCLC
–
1121105677
Publisher:
Oscar Publishing Services
Servi
REFERENCES
1.
"Development Strategy of New Uzbekistan for
2022-2026" approved by the decree of the
President of the Republic of Uzbekistan No. PF-60
of January 28, 2022, a collection of legal documents
of the Republic of Uzbekistan. - Tashkent, 2022.
2.
Caviglia, G, Krause, G and Thimann, C. 2002: Key
features of the financial sectors in EU
accessioncountries. In: Thimann, C. (ed). Financial
Sectors in Transition Countries. European Central
Bank:Francfort.
3.
Degryse, H., Kim, M., and Ongena, S. (2009).
Microeconometrics
of
banking
:methods,applications,
and
results.
Oxford
University Press, USA, Liu, H., Molyneux, P., and
Wilson, J. O. (2013). Competition inbanking :
measurement and interpretation. Handbook of
Research Methods and Applications in Empirical
Finance, page 197.
4.
Weill, L. 2003: Banking efficiency in transition
economies, the role of foreign ownership.
Economicsof Transition 11(3): 569
–
592
5.
Naldi, M., Flamini, M. (2014). Interval Estimation of
the Herfindahl-Hirschman Index Under Incomplete
Market Information. IEEE Computer Society, pp.
318-323.
6.
Bobakulov T.I. Ensuring the stability of the national
currency: problems and solutions. Monograph. -
Tashkent. 2007. - B. 104-105.
7.
. Abdullaeva Sh.Z. Money, credit and banks. -
Tashkent. 2000. -B.228-229.
8.
Weill, L. 2003: Banking efficiency in transition
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Economicsof Transition 11(3): 569
–
592
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www.cbu.uz - Official website of the Central Bank
of the Republic of Uzbekistan.
