Commercial Banks Will Vanish?

Ever since it came into being about three hundred years ago, commercial bank has played the overwhelmingly important role in the financial system. While with the accelerating development of financial system and the financial innovation in the past thirty years, capital market and other non-bank financial intermediaries have increasingly competed with commercial bank. Will commercial bank lose importance during this competition? Does this signal that commercial bank is an industry in severe decline? Will the commercial bank die in the future and be substituted by capital market and mutual fund?This paper tries to answer those questions from four aspects. Firstly, the financial intermediation theory is addressed to clarify that commercial bank is special compared with capital market and other financial intermediaries. Secondly, from the process of its development, commercial bank is proved to be an institution full of entrepreneur spirit and vitality. Thirdly, the status quo of commercial bank in USA does not justify that commercial bank is in a severe decline. Finally, there is also no evidence to show commercial bank in China will be substituted by capital market and securities investment fund.