shopping ". increased size and market share may give a bank more credibility in the eyes of larger customers, thus providing the opportunity for bigger and more value - added transactions. size can also open the door into overseas markets. a case in point is that a bank needs to have assets of at least us $ 20 billion to be eligible to establish a branch in mainland china, which is at present beyond the reach of most local banks in hong kong. future profits may also benefit from cost reductions arising from economies of scale a€ “ that is, the ability to spread fixed costs, including particularly those which are technology - related, over a larger scale of operations. cost economies can also be achieved by eliminating duplications in branch networks, functions and staff. there may also be a reduction in risk, and therefore saving in costs, due to geographic or product diversification and the ability of larger institutions to invest in more sophisticated risk management systems. to the extent that risk reduction boosts a bank's credit rating, or increased size attracts the attention of investors, its cost of capital may be reduced, thus providing another means to increase shareholder value. of course, merger is not the only way to maximise value. nor, must it be said, is m & a always pursued for this reason. management may have its own motives for chasing size - personal ambition or herd " consolidation in the financial sector " : group of ten, january 2001, available at www. bis. org. instinct may also be part of the story. this may help to explain one of the paradoxes of the consolidation boom. lots of companies are doing it, but the success of m & a in achieving its stated objectives of cost and revenue synergies is not clear - cut. does m & a work? the g10 report to which i referred concluded, for example, that there was only weak evidence of cost reduction arising from increased size, except perhaps in the case of smaller banks. while there was stronger evidence for improvement on the revenue side, the gains were probably not as large as those anticipated by the practitioners. not surprisingly therefore, there was not much to show that, on average, m & a generated significant shareholder value. rather, what tended to happen was that there was a transfer of wealth from the shareholders of the acquirer to those of the target. other studies, and some well - publicised mergers that have failed to deliver the promised benefits, support this somewhat sceptical view. it is however

65 % of the funds sourced from non - hong kong investors, according to a recent sfc survey. it is, however, worth noting that the survey also showed that 74 % of the practitioners in the asset management field were engaged in the sales and marketing functions. while the figure has already trended downward from 81 % in 2008, it does reflect the fact that hong kong needs to further expand the other segments of the asset management “ value added ” chain, e. g. in structuring, research, investment and trading. to achieve this objective, the hkma ’ s outreach work in the last two to three years has taken a new focus on asset owners, such as pension funds and sovereign wealth funds. 11. since 2010, the market development team of the hkma attended hundreds of meetings with overseas asset managers and owners. i am pleased to report that these outreaching campaigns are generating positive results, with about one - third of the institutions that we have approached indicating a commitment to devote resources to hong kong. specifically, 67 institutions have expressed interest in pursuing a hong kong presence and 48 institutions are planning to expand their existing operations in hong kong. 12. there are several reasons why the hkma is uniquely well placed to undertake effective outreach programmes. first, the hkma is a banking supervisor and banks are the key players in the financial markets in hong kong. second, the hkma is also itself a major asset owner and manager, with over us $ 370 billion of exchange fund assets under management. this makes it easier for the hkma to make the right connections and speak the same language of the asset owners or managers overseas. thirdly, the hkma senior management is fortunate to have the support from a small but dedicated team of highly professional staff in the outreaching programmes. finally, the hkma is part of the government and it is easier for us to refer issues or problems to the relevant government bureaux or departments for consideration or actions. in this context, i would like to thank in bis central bankers ’ speeches particular the sfc and investhk, which have been working very closely with us to provide the much needed advice or help when overseas financial institutions are thinking of locating or relocating their operations to hong kong. concluding remarks 13. ladies and gentlemen, i would like to end my comments by saying this : competition amongst financial centres has always been fierce and will be even more so in the future. competition is quite like rowing a boat up a river, in which case