On The Development Of Universal Banking In The Backgrounds Of Financial Globalization

China entered WTO in 2001with the promise of opening RMB businisses to foreign financial institutions in 2006. Thus, Chinese commercial banks were first put under the great pressure of existence and reform in the situation of economic globalization and financial globalization. The research and study on the universal banking launched by the commercial banks in developed countries is of great significance for the stability of global financial market and international economy. And, it is most important for Chinese reform of bank system to develop unviversal banking and learn from those of developed countries.This article consists following parts.First, the author compares the concepts between economic globalization & economic regionalization and financial globalization & financial frgonalization. Then, it presents the characteristics of economic globalization and financial globalization. Third in this chapter, it discussed active and passive influences of economic globalization and financial globalization.Second, this author describes the surroundings of bank existence in the background of financial globalization. The great leap of huge mulitinational firms, non-banking financial institutions, lasting financial innovations has worsened the existence of the traditional banking. Thebanks are faced with much more intense competition at present.Third, under the great pressure of existence, banks have been seeking ways out. In the struggle of living on in the fierce competition, banks in most countries has selected the way of enlarging their service scope and adopting the strategy of universeral banking. In this part of the author, it defines the concept of "universal banks" and the "universalization of banks". It describes the history, the essense of universal banks. Then, it argues that different organizational forms of universal banks have the different adaption to financial globalization. At last in the part, it analyses the refocus on the traditional business of the commercial banks.Fourth, this author maintains that the development of universal banks all around the world deepens banking crisis. On the one hand, all the traditional exposures or risks in a nation of the banks have been extended to the range of the globe. On the other hand, the development will enhance the global financial systematic fragility and may generate financial crisis.Fifth, because of the extended and enhanced banking risks, implementation of financial cooperation and coordination among countries in the globe is indispensable. In this chapter, it describes the Basel Committee and its practice in international banking supervision. It discusses the development of the practice of the supervision and highlights the contents of Basel Accord I and Basel Accord II and the evolution of the supervisory philosophy.Sixth, after the theoretic analysis, the author probes into the development of universal banking in China. First, the author lists the constraints of developing universal banking in China. Then, the author enphasizes the dual pressures from outside and inside factors. At last, the author points out the strategies of realizing the universally bankingmanaging in China.The innovative thoughts raised in the author include the following items.First, the author argues that economic globalization and economic regionalization are two concepts that do not contradic with each other. Economic globalization contains economic regionalization, or, economic regionalization is one part or a stage of economic glogalization. The relationship between financial globalization and financial regionalization is similar to that of the former two concepts.Second, two forms of universal banks, financial holding companies and universally opreating banks, both adpted themselves to the trend of financil globalization although they have their own advantages and didadvantages. Financial holding companies are so elastic that they enter and exit the global financial markets easily with quite low costs. However, interest contrdictions among the affiliates of the financial holding company has been enlarged from inside one country to the whole world, which enhances uncertainty and risks. That is called the "dual delegate problem". The universally operating banks, however, overcome the delegate problems. The departments of that bank share physical resources and information resources of the whole bank, through which the bank has strong ability to provide innovative financial instruments for its customers. Of course the universally operating banks also meet problems. They are faced with much higher costs when they make business convergence compaired with the financial holding companies and they cannot avoid "convergence of dual cultural discrepencies". A universally operating bank is under uniform management from the headquarters of the bank. So it is not so easy for the bank to enter and exit the global financial markets because it lacks flexibility and the ability to change quickly according to the conditions.Third, in the trend of universal banking in the backgrounds of financail globalization, some banks have come back to focus on their traditional banking service. So, the correct definition of a "universal bank" is a business firm that is allowed to develop all kinds of financial services without regulatory restraints and the universal banking is dynamic.Fourth, the development of universal banks deepes the risks. The banks are in the danger of some new risk exposure. They are soverein risk; the "dual delegate problem" in financial holding company; and, "the convergence of dual cultural discrepencies".Fifth, the author maintains that in the conditions of financial golbalization universal banks bring risks not only for themselves, but enhance the global financial fragility. Banks' traditional business are still under the strictest supervision, while in the other financial business field, the other financial institutions are faced with loose limitation. Thus, financial speculations are prevailing in the global market with the accumulation of risks. That influences the stability and development of world economy.Sixth, The banks in China are faced with very complex environment and their reform is more difficult than ever. The banks should pursue the goal of maximizing profits and minimizing risks, which is totally different from it was 20 years ago. Reengineering has been ushered into financial enterprises and especially commercial banks. On the other hand, China has entered WTO and will open RMB business all over the country for foreign banks in 2006. That means before Chinese bank finish their inner reform to change into financial firms, they will be all of a sudden pushed into the middle of the stage of intense competition from expierenced foreign banks. That is to say, Chinese banks have to compete with the foreign banks and adaptthemselves to financial globalization while they gragually complete their own system as commercial banks. The only wise selection of Chinese banks to live on is to learn from the developed countries and try to develop universal banks. Because of the dual pressure of inner reform and outer competition, the development of unvirsal banks in China need to overcome a lot of difficulty. In the last chapter, this author stresses that the process of unvirsal banking development in China is a long way. This author designs the reform of universal banking in three steps. In the first step, the banks are changed into corporations and sold publicly on the stock market with fostering a "professional banker" in the financial market to complete efficient corporate governance. At the same time, Chinese banks can establish affiliates which run non-banking financial businesses outside the mainland to train experts in non-banking financial businesses and aquire practice experience. In the second step, after the inner reform of Chinese banks almost reach the end, the regulatory agencies and the law making authorities can revise the financial regulations and laws accordingly, permitting the commerial banks enter different financial business fields in the form of bank holding company. In the third step, insurance companies, investment banks, trust companies and other non-banking financial institutions are all permitted to converge the service fields. At the same time, financial institutions are also allowed to venture into physical sectors. Two forms of universal banks are legal financial enterprises.Problems left to futher study are: First is how to implement Basel II in developping countries. Second is the ways of implementation of financial holding companies in China.