Research On Financial Business Innovations Of China's Commercial Banks

Since 1960's, with the release of regulation, the establishment of floating exchange rate system and the adoption of computer and communication technology in financial field, financial innovations surged in western countries' commercial banks that result creating many financial trade tools. By contrast, China's commercial banks lag far behind in the field of financial business innovations. Generally speaking, financial business innovations in western countries are aimed at two targets, one is to pursue profit, especially make profit from innovations, and the other is to escape regulation, so strengthen the management flexibility. Before every innovation is created considerate plan and comprehensive research are necessary on the related cost and benefit, the technology needed, the condition of market and the economic scale. However, our commercial banks always ignore the character of market during the financial innovations. As a result, few good profits have been barely achieved while banks had conducted many new businesses in recent years. With the increasingly heating-up competition in the financial market, how to develop financial business innovations is becoming an important problem faced China's commercial banks. This paper starts with the studying of the experience of financial innovations in western countries' commercial banks, combining with the present situation of financial innovations in China. The paper analyses the environment and conditions of developing financial business innovations, and then tries to advance the tactics and measures on how to develop financial business innovations in China in the coming two to ten years. And in the paper the arthor puts forward her own opinion on how to control risks of financial business innovations.This paper consists of five parts.Chapter I is the introduction, mainly explains the background of this paper, the literature review, the framework of the paper, and some important conceptions involved in the paper.Chapter II : This part mainly studies financial business innovations in western countries' banks since 1960's. There were different objectives and contributing factors of financial business innovations at different history stages. While all of those innovations took place under the pressure of heated-up competition, prompted by the target of making profit when the external economic environment had changed. And those innovations were supported by high technologies that were applied in the field of finance. At the same time, theories of financial innovations became more abundant withthe flourishing development of financial business innovations in western countries. The most typical theories were the theory of technology advancement, the theory of avoiding regulations and the theory of cost of exchange. These academic schools examined the contributing factors of financial innovations from various angles. The practice of financial business innovations was based on these theories. And we can summarize many successful experiences which maybe helpful for the China's banks by studying the history of financial business innovations in western countries.Chapter III: This part analyses the present situations, necessities and barriers of financial business innovations in China's commercial banks. The financial business innovations in our country have made considerable progress since China's reforming and opening-up. While the business innovations in our banks confront a lot of difficulties such as the lack of scientific guide and vitality, quantity-oriented not quality-oriented. Especially the innovation of off-balance-sheet business is at a comparatively backward stage. At the same time, enormous change have taken place in the operational environment in our commercial banks. The rapid development in capital market and full entry of overseas banks have cast enormous impact on China's commercial banks. To survive and develop in the increasingly competition of non-banking financial institutions and foreign financial institution, banks should spare no en...