The Promotion Of Commercial Banks' Competitiveness

In 2007, financial crisis raised by American sub-prime mortgage crisis spreads to every corner of the world. To enhance the competitiveness of commercial banks has become the focus of attention in the current economic situation,. In the era of danger and opportunity coexists , China should promote the competitiveness of commercial banks to emerge in the crisis and became the world's financial heavyweight. Efficiency is compressed into competitiveness of banking and improving the efficiency of the banking industry to guard against financial risks, and promote sustainable development of the banking industry is all about. Economies of scale reflects availably the change relationships between scale of operation and cost-benefit and impacts operating efficiency and cost effectiveness. This article discusses the way of enhancing competitiveness level of commercial banks through develop economics of scale from the perspective of the co-efficient of market concentration and mathematical analysis theories.This paper starts from the competitiveness theories of commercial banks, expounding the connotation and the evaluation methods of the competitiveness and using the methods of qualitative analysis. From the impact on the competitiveness of commercial banks in two aspects, namely, property rights system and corporate governance structure and the effectiveness of banking supervision in order to comment on the state-owned commercial banks and the world's leading commercial banks in the level of competitiveness gap. In the analysis of economies of scale in commercial banks, this paper explains the general principles of economies of scale, economies of scale of commercial banks and its impact on the causes, as well as by return on assets and market concentration, market share and market concentration measured by commercial banks economies of scale. Combining with China's actual situation,the development of economies of scale, four major state-owned commercial banks of China's competitive beyond other commercial banks futher can be seen from the coefficient of concentration of the banking sector and the market structure. Through analysising of bank's best regional model, we can conclude the two major elements impact on commercial banks in economies of scale: the share of deposits and services, management costs, therefore, through the development of economies of scale to enhance the competitiveness of commercial banks.Based on the above findings, I believe that the best model type of the market structure of China's banking industry should be taken to an oligopoly. Finally, I propose the path of choice and policy recommendations to enhance the competitiveness of commercial banks.To be specific, this paper includes five parts.The first part introduces the background of subjects, as well as the domestic and international research on the economies of scale synthesis. In the current context of financial crisis, China's financial sector faced with unprecedented challenges. Finance is the core of modern economy. Commercial banks are the most important part of the financial system and the actual executor of monetary policy of the Central Bank. A country's commercial banking system's stability has a bearing on the stability of the entire financial system, therefore, commercial banks in the role of the financial crisis is important. The significance of this article is that first, be benefit to economies of scale on the situation of China's commercial banks and the existing problems to have a clear understanding. Second, be conducive to China's commercial banks to improve the competitiveness of the path. Finally, in favor of a more comprehensive understanding of the factors that affect the economies of scale in banking. This part also describes the content of domestic and foreign scholars on the economies of scale in research methods and results.The second part introduces the connotation of commercial banks competitiveness, the competitiveness of commercial banks in the evaluation of methods and evaluation methods used in this article, as well as the competitiveness of commercial banks in the international comparison.The connotations of competitiveness of commercial banks include the following: First, the competitiveness of commercial banks register as the comprehensive strength of banks. Second, this competitiveness focuses on reflecting the development prospects of the banking and sustainable development of the commercial banks. Third, the competitiveness level of commercial banks is a relative concept as well as a result of comparing with other commercial banks. Fourth, the competitiveness of the commercial banks reflect as a dynamic competitive.The competitiveness of commercial banks in the evaluation methods include: the evaluation method of the World Economic Forum and Institute of Management Development in Lausanne, Switzerland; "Banker" magazine's evaluation method; rating number system for the management by supervision department of foreign banks; our evaluation system proposed by academics. In this paper, the market concentration index cards and several theoretical methods to describe the commercial banks through the development of economies of scale to improve their own competitiveness.This article analysises two aspects that focuses on not only reflecting the competitiveness of Chinese and foreign commercial banks on the competitiveness of the gap, but also the important impact on competitiveness. That is, property rights system, corporate governance structure and the effectiveness of banking supervision. To be concluded, China's commercial banks have not a very clear ownership.Corporate governance structure still need to be improved and the effectiveness of banking supervision still have large gaps comparing with Western developed countries.The third part describes the general principles of economies of scale, the factors that affect the economies of scale, economies of scale advantages and shortcomings. This part focuses on the definition of economies of scale of commecial banks, factors of influnce economies of scale of commercial banks and methods of measuring commercial banks in economies of scale.Economies of scale is a concept of examining the scale of economic organization and economic relations that refers to a kind of condition of the average cost of the overall economic organizations to be reduced and cost-effective to be improved due to the scale of economic organization expansion, Economies of scale are influenced by oproduction inputs, technology, management, products and other factors. Advantage of economies of scale lie in it can help to enhance economic efficiency and optimize the allocation of resources. Second, it benefits to promote industrial enterprises in innovative forms of organization. Third, it is conducive to the formation of a reasonable market structure. Fourth, it helps to strengthen the market competitiveness of enterprises. While shortcomings are the economies of scale may lead to the occurrence of a monopoly. Second, economies of scale tend to lack personality and good strain capacity. Third, economies of scale can also lead to the risk of corporate strategy, financial risk, organizational risk, capital and other operational risks.The factors of influencing economies of scale of commercial banks can be concluded into the level of socio-economic development, transaction costs, market structures, decision-making efficiency of the banking system, as well as financial innovation and other factors. The methods of measuring economies of scale are rewards on assets and market concentration ratio as well as market shares and market concentration ratio.The fourth part describes our situation of market concentration ratio of the commercial banks. The ideal market structure of China's banking is the oligopoly market structure that be proposed through analysing demonstration of the best operation of the regional banks.Market concentration ratio researching can be concluded that, China's four major state-owned commercial banks have a higher degree of market concentration. The four ones in China's competitive strength still outstanding that are beyond further the other commercial banks. Conclusions through analysing models could be first, the theoretical model taking into account the impact of internal and external banks formed bank economies of scale factors, and proving a point from the mathematical statistics to the existence of an appropriate scale of commercial banks in the region does not mean the bigger the better. Second, the two elements of impacting commercial bank profit levels are the share of deposits, labor and management costs. Third, the average cost of the unit asset of commercial banks is influenced by deposit share, labor and management costs.The fifth part introduces the path of choice to enhance the competitiveness of the commercial banks. That is, to develop the economies of scale. To improve the competitiveness of commercial banks can start from the following aspects. First, deepen the reform of property rights system and establish perfect management structure of banking. Second is to encourage annexation and recombination among banks as well as to expand the scale of commercial banks. Third, form strategic alliance of commercial banks and enlarge effect of the economies of scale.