City Commercial Banks Financial Products Innovation Mechanism

Financial innovations which started at the end of 1960s have been sweeping over the whole industry and have been leading to a truly revolution in this field. Entering into 90s, the trend is still continuing and speeding up. Financial innovations, mostly connecting with financial instruments, markets, and institutions, are becoming the most important methods for commercial banks to survive and develop in the fierce competition. How should the City Commercial Bank of China to respond to this challenge, the core is to establish the characteristic mechanism which is most suitable for city commercial bank to financial innovation. This paper is divided into 4 sections. The first section is a sum of literatures about financial innovation. In this part, the original theory of innovation by Mr. J.A. Schumpeter in last century is introduced, which promoted the idea of original motivation for innovation. Then the modern Chinese researcher, Dr. Wang's financial innovation theory in Chinese context is fully developed, which includes his definition about innovation in narrow and broad senses, analysis of historical innovation, and the current situation in China and the exiting issues. The second section is an analysis of the current systematic obstacles for innovation in Chinese commercial banks. On one hand, the current commercial banking legal system and supervision system do not provide a supporting environment for innovation; on the other hand, strict organizational structure, lack of effective incentives, and no strong MIS, also result in slow innovation internally. The third section is a thorough analysis of the successful innovation...