Transformation Of Commercial Banks In China From Financial-Function Perspective

Change of modern financial environment aggravates the pressure for functional transformation of commercial banks in China. Most of the researches focus on giving similar advice on the basis of what have been done in foreign banks, which require more theoretical background. Using "financial function" as a research prospective and theoretical basis, this paper works over financial functions of commercial banks, and we suggest financial innovations with effect of risk allocation to be the best way of transformation.Firstly, we find out from the capital flow in our country the main traditional function of banks as "capital allocation", which needs to be upgraded because of changes in this function's supplier and demander. While financial reforms in these years have made the forming of interest rate and exchange rate more market-oriented, risk-environment is much more changeable and demand of risk-dealing is much more intense. AH these provide a favorable condition for banks' transformation of financial function to a high-level. What's more, risk bears characteristics of financial resource, which means that the mode of resource-allocation can be also applied to such a special resource as risk. Therefore, financial function of commercial banks should be upgraded to "risk-allocation", and this new conception is greatly different from traditional risk-management in the aspect of environment, attitude and operation.On the basis of orientation to "risk-allocation", we suggest that it should be achieved by financial innovation. Considering banks' special status as financial agency, this paper discusses innovation as follows: as for customers' demand of allocating risks, we analyze the function of non-standardized financial derivatives such as FRA and SWAP, and summarize financial products contacted with economic indexes as well as their future development; on the other side, banks' risk-allocation for themselves is restructuring credit and market risks via financial innovations.Finally, we give advice about risk-pricing and risk control when banks are using innovations to allocate risks. There is also a revelation for supervisory institution that combination of functional supervising and institutional supervising is more suitable under today's circumstance.