Study On Operating Efficiency Of China's Commercial Banks

This thesis is the study on the operating efficiency of commercial banks in our country,which at first analyses deeply efficiency meaning,sorts and research methods.Based on this,we do the single-factor index comparison on our commercial banks and research the difference of the efficiency level.Then we make empirical study on 14 commercial banks with the frontier efficiency analysis method,and count the nowady numerical value of operating efficiency.Moreover according to this actuality we put forward the relevant policy suggestions.The elementary conclusions and measures advice are following:â‘ Elementary conclusions1) The control effect of cost efficiency of our commercial banks is generally ascending.In our country the numerical value of the commercial banks is larger and larger unfalteringly,which shows that recently the effort have worked that the commercial banks strengthen cost control and descend resource waste,and the reformation effect of financial system deserve affirmation.2) The numerical value of cost efficiency of our commerical banks is universally high.The value that comes by the frontier efficiency analysis method displays:Among the research years,the value of cost efficiency distributes between 0.702 and 0.987,and the annual average efficiency value of all the commercial banks is above 0.85.But analyse from the distribution of all the values,the values are comparatively centralized and most are between 0.80 and 0.95.3) The cost efficiency circumstance of our stated commercial banks is generally good.The numerical values of our stated commercial banks are above 0.80,but this point can't illuminate that the cost efficiency is higher in our stated commercial banks than the same-scaled foreign commercial banks.Because the sample banks are not enough many that owns similar sacle with our stated commercial banks, This forces the state-owned commercial banks only to compare with the smaller joint-stock commercial banks and a few samples of the state-owned commercial banks,thereby lead the estimated cost-effective value higher.4) China's state-owned commercial banks cost efficiency has risen. In recent years, The trend is evident that China's state-owned commercial banks cost efficiency is steadily upward. This explains recently the state-owned commercial banks enhance the bank's ability of controlling costs and upgrade assets quality by continuously digesting doubtful assets, carefully delivering loans.5) The cost efficiency level of China's joint-stock commercial banks is universally higher.The cost efficiency is generally high, among the interval of [0.790,0.987], the annual average efficiency value is among the interval of [0.890,0.947], and there exists obvious trend upward. In the rankings in 2005, the cost controlling efficiency of China Merchants Bank is the highest, followed by Guangdong development bank and Shengzhen development bank. Everbright Bank owns the lowest cost efficiency among the comparison of the joint-stock commercial banks.6) The cost efficiency difference caused by property difference is significant. In China, the controlling circumstance of cost-effeciency of the joint-stock banks is obviously better than state-owned banks. In 2005, the rankings of 14 domestic banks shows that there are 4 joint-stock commercial banks in the top five are. 1998-2005, the average efficiency value of the joint-stock commercial banks is 4 percent higher than that of state-owned banks. In 2005, the cost efficiency difference between the Merchants Bank of China ranked at the top and the Agricultural Bank of China ranked at the bottom is about 18 percent, an obvious gap. And the annual average efficiency value of joint-stock commercial banks has been always higher than the value of state-owned commercial banks.â‘¡Policy suggestionsBase on the deeply analysed general theory on our commercial banks in this thesis,we compute the efficiency level of our commercial banks by the frontier analysis method,and according to this we study the actuality of our commercial banks at present,then put forward the relevant policy suggestions aimming to the existing problems in our commercial banks system at present,which is following:1) Optimize property right system.Our commercial banks should advance actively the reformation of the property right system,and perfect gradually the bank's juridical person management structure.To state-owned banks,the elementary approach of carrying out the reformation of the property right system is the joint-stock system reconstruction.2) State-owned commercial banks should appropriately shrink the scale , effectively allocate the resources. The reasons of state-owned commercial banks'operating inefficiency are, first of all, technical factors, followed by workers factors. Technology and bank operating efficiency are proportional relations, moreover technical factors are the key factors of reducing bank operating costs and improving operating profits. The quality of human resources will determine the competitive strength of commercial banks.3) Reduce the bad loans ratio,increase the ability of enduring risk of commercial banks. CBRC should actively promote the new means of disposal and create the favorable conditions on the aspect of policies for banks. Commercial banks should also try various new methods to actively dispose bad loans, including clearing up loans, vendue, write off bad debts and so on. In addition, banks can focus on the retail banking business development, which can both decentralize management risk and reduce the ratio of bad assets. Finally, try to improve the quality of the loans and do the examination beforehand, tracking the operating and supervising afterwards.4) Raise the capital adequacy ratio of commercial banks. Banks can bring in strategic investment partners, in particular to attract foreign banks to buy shares ,which will not only be profitful to the banks to replenish their own capital, but also study the more advanced management experience from foreign banks and improve the bank's own management level. For state-owned banks, before the joint-stock restructuring, the government would be able to inject capital to state-owned banks in order to improve the state-owned bank's capital adequacy ratio. CBRC should encourage commercial banks to issue sub-bonds to enrich the capital according to international rule. In short, to improve the bank's capital adequacy ratio is the considerations of improving banks'efficiency, as well as the basic protection of banks'sustainable development.5) Further promote the mul-business operation mode of banks. To create a fair and effective competition environment, strengthen the inter-banks'competition and promote operational efficiency improvement, China's banking industry urgently need to promote deeper mixed operation reforms. Separate operation is not suitable for the development of market economy, to the financial industry, too particular separation will hinder the development of financial enterprises, can not meet the needs of economic development and clients, and can not establish effective financial competitive environment.6) Strengthen internal operations and management of banks. There are the following four aspects of the reforms to do in order to improve internal management and improve the banking system from. First, the system of organization, in accordance with the market-oriented and customer demand for the establishment of an internal financial functions, at all levels should be based on the Bank's level of functionality and institutional settings for focus and the rejection of the traditional principle that the people counterparts. Secondly, the funds management to strictly enforce the asset liability management, loan business credit instruments increase the proportion. In the risk management system, it should be in the ratio of assets and liabilities on the basis of management and emphasis on strengthening the management gap, interest rate sensitivity analysis and other sophisticated asset-liability management techniques to enhance asset and liability management system performance. Finally, the personnel management system, to improve the state-owned commercial banks in the employment mechanism, to resolve personnel burden, and improve the quality of personnel.