Trends And Revelations Of International Banking Industry Reformation

The worldwide banking industry has experienced a tremendous changesince the late of 20th century, with background of the strike of financialglobalization and the forming of the new order of international finance. Themost attractive one in this transformation is merely the large-scale bankingreformation and integration at the turn of the century. Looking into thebanking reformation all over the world, no matter in developed countries oreconomy transition countries, it can be concluded into three trends in general:the restoration of mixed financial industry, large-scale merger and acquisition(M&A) of banking and property right reform of state-owned banks. Theinternational trends and circumstances are what our banking industry has toface to. During the time when the reform of our state-owned commercialbanks are carrying out likes a raging fire, to explore the international trendsof banking reform and draw on the experience of other countries' bankingreform have a very important significance.China's financial industry is facing the challenge of opening the economy tothe world since from its accession to the WTO. Affronting such deep socialrevolution, which is influenced the most of the whole financial communityare already the state-owned commercial banks. That is not only because ourstate-owned commercial banks are the most important in our indirect mainlyto the financial structure, regardless of their asset size, business coverage,customer holdings, and the relationship with other departments of thenational economy, but also past reforms are in a relatively closedenvironment, that means everything can follow the timetable of our own.However when we are the member of WTO, it means all of the systems ofour economy and finance are connected with international practice from allorientations. Then, the state-owned commercial banks will be doomed toconfront with the coming challenge from more powerful competitors.International trends of the banking reform, we not only have to face, but alsogood for. Although the reform method carried by each country is different asthe result by the distinction in situation of a country, systems of economy andpolitics, environments of history and culture and then many practices inforeign countries can not completely copy to our country. However,considering the situation, grasping international reform trends of theinternational banking industry, drawing upon the experience and lessons ofother countries' banking industries reform and deriving useful inspiration arealso important.The paper is made up of two key components. Hereinto, part oneseparately describing and analyzing the three tenders: the restoration ofmixed financial industry, merger and acquisition of banking and the reform ofproperty right of state-owned banks, which are concluded from internationalbanking reform. Part two discusses China how to affront the trends and whatshould be take cautiously, also how to choose the proper reform methodaccording to our national situations, aiming at the three trends concludedabove.First,this part chiefly analyses the first trend of international bankingindustry reform—The restoration of mixed financial industry. This chapterbegins with international banking management mode transaction history,indicates the circle of the banking management mode from mixed financialindustry to separated financial industry then back to mixed financial industry.And demonstrates the choice of mixed financial industry is the inevitabletrend of the banking system reform in theory and practice through indicatingthe particular advantage of the mixed financial industry.Second, this part chiefly analyses the second trend of the internationalbanking system reform—Large-scale mergers and acquisition(M&A) ofbanking. This chapter summarizes large-scale M&A incidents in developedcountries' banking industry from 1995 to 2004, to illustrate the activeperformances of the M&A of banking in recent years, then based on that,summarizes the characters of the M&A of banking at new date, analyses theprimary causes from the aspects of motive and real possibility.Third,this part chiefly analyses the third trend of the internationalbanking system reform—Property right reform of state-owned banks. Thischapter analyses the practice in reformation to property right of state banks indeveloped countries and economy transition countries separately. In theanalysis, developed countries represented by France and Italy;the economytransition countries represented with Middle East Europe. Through analysis,it shows that regardless of starting from the theory of western property rights,or from the difficulties confronted by the state-owned banks in the developedcountries or economy transition countries, to reform the property right systemof the state-owned banks is necessary and the certain trend. The threechapters above compose the first logical part of this paper.Facing against the three reformation trends in international bankingindustry and the situation that China is increasingly integrating into theinternational financial environment, Part Two gives some propositions onpolicy to our banking industry. The core of these propositions is we mustensure that banking system is compatible with the entire economy system;thereformation of banking system must be started from our national situation, atthe same time of conforming international trendsFirstly, in the face of the trend—The restoration of mixed financialindustry, we should consider clearly that the separated financial industrymode what we adopted before is necessary at particular time, and it wasaccommodated with the national situation at that time. The mixed financialindustry is the certain trend of our banking reformation in future, but itscarrying on is not the work in one day either. It should follow the requirementof gradual transition to advance it seriously and properly.Secondly, in the face of the trend— The merger and acquisition ofbanking, we should be aware of the tide of the (M&A)is unavoidable toevery bank in the circumstances of economic globalization. The influence ofM&A of banking, both positive and negative, must be fully understood.Particularly, we should deal with the modest size of the M&A of bankingrationally, not blindly chasing the largest one only.Thirdly, in the face of the trend— The reform of the state-owned banks'property right, our banking industry has waken up to the significance ofreforming state-owned commercial banks into modern commercial banks,and take the joint-stock reformation as the tropism of the state-ownedcommercial banks' reformation. In the process of the reform, it must be takenserious in choosing strategic investors. However, if the strategic investors arefetched into joint-stock reformation of our state-owned banks successfully,diversification of property rights will be achieved. And the converse approachsystem result from that will expedite consummating of corporate governancemechanism in domestic banks and accelerate them to be modern commercialbanks in deed.