This paper introduces the establishment and improvement of the market mechanism of commercial banks
Introduction The establishment and perfection of market mechanism is the necessary external environment for improving the efficiency of commercial banks.Market competition mechanism directly affects the non-allocative efficiency of banks through product market and manager market, and it is also the pressure and power to improve the internal governance mechanism of commercial banks, prompting banks to improve internal governance and improve operating efficiency.Market access Since the establishment of the first joint-stock bank – Bank of Communications, China’s commercial banks are gradually opening market access.After China’s formal accession to the World Trade Organization, the regulatory authorities adopted more relaxed policies on the access of foreign banks and welcomed overseas strategic investors to participate in the restructuring and transformation of China’s banking industry.In December 2003, the CBRC increased the shareholding ratio of individual foreign institutions from 15% to 20%.If the total proportion of foreign investment is less than 25%, the nature and business scope of the shareholding institutions will not change.Foreign financial institutions are entering China’s financial market at an accelerating speed, not only by adding branches, but also by means of equity investment.In 2001, HSBC Holdings Limited acquired 8% of the shares of The Bank of Shanghai, and the International Finance Corporation subscribed 15% of the shares of Nanjing Commercial Bank and 12.4% of the shares of Xi ‘an Commercial Bank. In December 2002, Citibank invested nearly 600 million yuan to acquire 4.62% of the shares of Shanghai Pudong Development Bank.In December 2003, a foreign consortium composed of Hang Seng Bank, the International Finance Corporation, a subsidiary of the World Bank, and the Government of Singapore Investment Corporation invested a total of 2.6973 billion yuan to subscribe 24.98 percent of the shares of Industrial Bank.HSBC bought 15.98 percent of Industrial Bank for 1.7 billion yuan, making it the second largest shareholder after the Fujian provincial government.In 2004, HSBC Acquired a 19.9% stake in BoCOM for 14.461 billion yuan, becoming the bank’s second largest shareholder after the Ministry of Finance.In June 2004, Newbridge acquired 17.89% of the shares of SHENZHEN Development Bank.Temasek acquired a 4.55 per cent stake in Minsheng in October 2004.State-owned commercial banks introduced strategic investors in 2005.In June 2005, Bank of America invested $2.5 billion, in July, Temasek Holdings invested $1.455 billion to become the investor of CCB, in August, Temasek Holdings invested $1.524 billion, Royal Bank of Scotland, Merrill Lynch and Li Ka-shing invested a total of $3.048 billion to become the institutional investor of Bank of China, In January 2006,The Goldman Sachs Group, which includes Goldman Sachs Group Inc., Allianz Group Ag and American Express Co., invested $3.78 billion as institutional investors in ICBC.Compared with the situation of foreign capital entering China’s banking industry like fire, the threshold of private capital entering the bank seems to be very high, and the formulation of relevant policies appears to be concerned.The introduction of foreign equity can improve the ownership structure of China’s commercial banks, which can not only enrich the capital strength of China’s commercial banks, but also bring “learning effect” and improve the management efficiency of China’s commercial banks.After joining the board of directors of Shenzhen Development Bank, Xinqiao is gradually reforming the financial system, risk management system and personnel management system of SHENZHEN Development Bank, and gradually establishing internal control system and management system in line with international standards.If the vertical management system is implemented in the financial system, the financial executive officer is endowed with sufficient rights by the head office. His administrative level is equivalent to that of the leader in charge of the branch before the reform, and he has the right to approve the planning and accounting business, and the right to advise and veto the planning and accounting personnel.The head of the branch also has the right to veto the items approved by the financial executive officer and the right to apply for reconsideration of the items denied by the financial executive officer.SDB bank branches, the establishment of the internal checks and balances mechanism is not only beneficial to improve the efficiency of SDB bank itself, at the same time, the improvement of the whole management level of China’s banking sector has the important enlightenment function, brings to our country banking market competition “catfish effect”, help to improve the overall efficiency of China’s banking industry.However, from the perspective of the target selection of strategic investors, Temasek’s acquisition does not bring “synergistic effect”.Although Newbridge has had a successful acquisition of Hanil Bank, as an investment fund it is adept at restructuring acquired companies and selling them for a good price, rather than making banks more efficient in the long run.Therefore, when foreign banks enter China, we should consider whether they are conducive to improving the efficiency of China’s banking industry, and introduce them in a differentiated and selective manner, rather than simply lowering standards or “desperate” to supplement the capital.We should consider three aspects of market access: institutional access, business access and senior management access.For institutional access, first of all, we should focus on introducing those banks with high efficiency, such as high return on capital and return on assets, good corporate governance mechanism, advanced management technology and level, especially risk management technology and ability.At the same time, banks with high efficiency often show good credit, strong strength and high supervision level in their home countries, which is also conducive to prevent the negative impact of foreign banks on China’s economy.At present, when commercial banks introduce foreign capital, they pay more attention to capital and asset scale, but ignore efficiency indicators such as management level, which may ultimately fail to improve the efficiency of China’s banks.In particular, foreign-shared commercial banks are not branches of foreign banks, so they cannot use all the assets of their parent banks as a guarantee for settling deposits. In this way, the risks of foreign-owned banks may affect China’s economy.Therefore, it is necessary to prudently select the partners for cooperation. Before deciding the partners, it is necessary to fully investigate and study the capital adequacy ratio and asset scale of foreign strategic investors, the supervision system of the parent bank’s home country, and whether they enjoy the deposit insurance system of their home country.Full negotiation should be carried out before determining cooperation. Due to the problems of system, national conditions and business scope, the conditions that violate laws and regulations of our country and damage the legitimate interests of other shareholders should be rejected.Second, we should emphasize the principle of reciprocity when allowing foreign banks to enter.The national treatment policy implemented by some countries is hierarchical. In view of this practice, China should also make some differences in the audit of the access of foreign banks in these countries. For example, the capital adequacy ratio of their branches should also be regulated.Business access should conform to the objective needs of social and economic development;Complying with the legal provisions and policies of the financial operation system;Conforming to the function positioning and business development capacity of financial institutions;Establish sound risk control system according to business risk characteristics;And establish strict scientific business operation procedures and risk protection.Business access can adopt a tiered license system, foreign banks that meet certain conditions (such as working capital, asset scale, business operation years, internal control system, business performance, etc.) and their home countries can give national treatment to overseas branches of Chinese banks are allowed to apply for a comprehensive banking license, with the same rights as domestic banks.For foreign banks that have not met the requirements or whose home countries have not implemented the corresponding national treatment for Chinese banks, they will only be granted restricted bank licenses, which will mainly restrict their RMB business and prohibit them from operating domestic savings deposits and small time deposits.Foreign banks other than the above two types of banks will be granted special banking licenses, allowing them only to operate offshore business.For the market access of senior managers, it must be ensured that the economic and financial policies of the State can be correctly implemented;Familiar with and strictly abide by relevant economic and financial laws and regulations;Having educational background and experience suitable for the position;Having professional knowledge, organizational management ability and business ability commensurate with the position;No violation of laws, regulations, discipline and other bad records.For the admission of senior managers, certain Chinese background or working experience in China can be required.We allow foreign Banks to enter the goal should be clear, that is to improve the banking market competition, domestic Banks and learn the advanced management technology and management concept, but banking market occupied the main part, cannot be controlled by foreign Banks or when big Banks to introduce strategic investors so not allow foreign Banks to realize the control.In the transition countries of Eastern Europe, foreign institutions, after penetrating through the privatization of state-owned banks, are basically in a monopoly position, and their market share in the insurance industry is as high as 95%.When the domestic financial industry is at a lower stage of development, the extensive participation of foreign capital often inhibits the development of the national financial industry, especially when the state-owned banks are in a monopoly position and the domestic private banks are inhibited.At present, foreign banks in China are more inclined to small and medium-sized joint-stock commercial banks, which shows that most foreign banks value their control over banks.After entering small and medium-sized banks, it is often easier for foreign banks to gain control of the board of directors or certain areas.Citibank, for example, took control of the credit card business when it moved into Shanghai Pudong Development Bank, and Newbridge’s directors apparently had control on the board.The foreign financial institution was able to operate exactly as it wished.When this intention is consistent with China’s banking and economic development goals, we can achieve the purpose of introducing institutional investors.Once this intention is inconsistent with our banking and economic development goals, how do we control the possible negative impact, which is the actual problem faced by Poland and other countries.China is a large country with uneven economic development level, and the problems of bank efficiency and economic reform and development are far more complicated than those small countries in Eastern Europe. China’s banking industry must not be dominated by foreign banks like those in Eastern Europe.Conclusion Drawing lessons from the early development of sino-foreign joint venture to the final equity change, not foreign investment withdrawal to set up another enterprise, or foreign investment into a wholly foreign-owned enterprise.Therefore, while actively introducing foreign institutional investors, China should vigorously promote the development of Chinese private capital in the financial field.When private capital is not mature, state capital should play a leading role in the banking industry. After private capital is mature, the proportion of state capital can be appropriately reduced and private capital and foreign capital can compete.