The Research On Different Management And Operations Of City Commercial Banks

As the impacts of economic and social reform deepen, finance and economics developments are going through a series of remarkable changes.Under the influence of economic development, liberalization of interest rate, the revolution in finance and tightened regulation of international finance, our research focus on the differences between national commercial banks and regional commercial banks.At the beginning, this paper reviews and examines the current environment in which regional commercial banks and national commercial banks operate. This paper reached a conclusion that emulating national commercial banks and the ways their operate; regional commercial banks will no longer meet the challenges from the new social and economic development in China. Regional commercial needs to differentiate themselves from national commercial banks.From the theoretical standpoint, this paper applied quantitative and qualitative methods to compare and investigate the impact of two different strategies deploy by regional commercial banks:homogenization with national commercial banks and Differentiation from national banks. Regional commercial banks are deeply rooted in local communities and local economies. As a result, this paper found regional commercial banks, which deploy the differentiation strategy has advantages over their counterpart national commercial banks. From the practical perspective, this paper analyzed assets and liabilities composition of these banks, based on market data. This paper can draw the conclusion that regional banks has competitive advantages over regional banks in retail banking, small to mid-size commercial lending. Regional banks should apply their competitive advantages in the areas mentioned above to achieve differentiation. Based on this premises, this paper further discuss how the differentiation strategy works for the regional commercial banks from the standpoints of market positioning, financial innovation and corporate management.From market positioning standpoint, Homogenization strategy does not achieve higher operating efficiency as regional banks expend outside of their home regions. In contrast, differentiation strategy improves operating efficiency. This further proves differentiation is a better strategy to compete against national commercial banks.From financial product innovation standpoint, due to the restrictions and lending regulation imposed to national commercial banks by our government, these banks can not effectively and adequately lend out their capital. As a result, opportunities open up for regional commercial banks. Inter-bank relationships between national and regional commercial banks promote financial products innovation, avoid restrictions on commercial lending restrictions, and reduce capital utilization. Innovative financial products created due to these relationships, such as bank loan transfer, credit and trust businesses, and debt repos, are widely used in the current Chinese financial market. To this point, this paper believes financial product innovation stem from the inter-bank relationship is a double-edged sword. On one hand, it improves utilization of capital of both types of commercial banks. But on the other hand, these innovations bring about liquidity risks and credit risks, while expanding credit facility in the market. Regional banks and their regulatory institute need to be aware of the risk associate with the above mention risks.From the corporate management standpoint, this paper examined foreign strategic investors’impacts on national and regional commercial banks. Through our analysis, foreign strategic investors can effectively increase operating efficiency and profitability, and provide better cost control with regional commercial banks. However, the same impact can not be found with national commercial banks. Therefore, regional commercial banks can implement corporate shareholding structure to achieve differentiation strategy and improve corporate management.This dissertation provides a theoretical basis for regional commercial banks to differentiate. It also provides suggestion how regional commercial banks can enrich our banking system by providing differentiated financial products and services, providing liquidity to SME, achieving multi-level operating structure and operating system, better adapting to the nation’s economic reform and development. From the view of academic research, this article deepens the study of China’s city commercial banks. This dissertation discusses the necessity of regional banks’ differentiation strategy and explores areas such as market positioning, financial product innovation and corporate holding structure for the regional commercial banks.