Study On Operating Efficiency And Influencing Factors Of City Commercial Banks In China

In recent years, thanks to the upward trend of the economy and prosperity of the banking, city commercial banks expand rapidly. According to data from the China Banking Regulatory Commission, at the end of the third quarter of2013, the total assets of city commercial banks reached13.96trillion Yuan, accounting for the banking sector increased from5.1%at the end of2005to9.49%this year, which was4.17times than that at the end of2007; deposits and loans of this year were3.65and3.61times respectively than that at the end of2007, which is higher than the national average banking growth rate4.34and5.86percentage over the same period. Besides, the assets quality of city commercial banks improved significantly. Capital adequacy ratio rose1.81percentages compared to2007; non-performing loan ratio fell from3.04%at the end of2007to0.87%this year, which is lower0.59percentage than non-performing loan ratio of the national average banking. But in some areas, individual banks’asset quality has deteriorated over the2012, the non-performing loan balance and non-performing loan ratio both increased. Meanwhile, the business environment and regulatory are undergoing a series of important changes, including interest rate liberalization, financial disintermediation, and the combination between Internet and credit intermediation which promotes fierce competition in the banking sector. City commercial banks need to improve their operational efficiency to cope with the impact of external changes and challenges. Therefore, how to strengthen the city commercial banks’competition, and ensure its efficiency is particularly critical. Firstly, this paper reviews the related theoretical literature of city commercial banks efficiency, which is the theoretical basis of city commercial banks’development, including theory of financial deepening, theory of financial intermediation, financial organization theory and social capital theory; then uses literature analysis, comparative static analysis, empirical analysis and field investigation to define the connotation of city commercial bank efficiency and to explore the differences between technical efficiency, scale efficiency and allocative efficiency, and analyze the factors, target system and evaluation methods which affect the efficiency of city commercial banks. On this basis, from the macro level, we will use DEA method to estimate the operating efficiency of city commercial banks, and then respectively measure the eastern, central and western city commercial banks’efficiency. Next, we should analyze a number of factors that affect the efficiency of city commercial banks. Finally, we will draw some reasonable recommendations.The results of this thesis show that:(1) Through efficient frontier analysis method, we will calculate efficiency value of city commercial banks in our country:the year in the selected sample, technical efficiency (crste) distributed in [0.378,1]; purely technical efficiency value distributed in [0.422,1]; scale efficiency distributed in [0.494,1]; and the average technical efficiency, the average pure technical efficiency and the average scale efficiency were0.824,0.877and0.939. But from the distribution of all data, the data is more concentrated and distributed in the [0.80,0.95]. The main reason is the efficiency trough the use of frontier analysis method is relative efficiency values, which is the relative efficiency, not absolute efficiency values. Overall, overall efficiency values of city commercial banks floated around0.8, which is a relatively high level and demonstrates city commercial banks operating conditions improved gradually, which indicated the shareholding reform, cost control and resources save of city commercial banks is very significant. The results of the financial system reform should be affirmed.(2) Based on the different location and different levels of economic development, urban commercial banks will be divided into eastern, central and western regions to analyze. In the samples,14banks like Wenzhou Bank, Hangzhou Bank and Dongguan Bank belong to eastern part;8banks like Zhengzhou Bank, Changsha bank and Hubei Bank belong to central region;11banks like Shizuishan bank, Fudian Bank and Nanchong Bank belong to the western region. It can be seen from the table, the eastern city commercial banks in terms of technical efficiency, pure technical efficiency or scale efficiency is slightly better than the central and western regions. Compared with the eastern and central provinces, technical efficiency and scale efficiency of the western region like Gansu, Sichuan, Inner Mongolia, Xinjiang, Yunnan, Shaanxi, and Ningxia bank showed a lower level but Yunnan and Ningxia bank was not reached the full level of technical efficiency. Compared with other provinces, allocative efficiency of the above western provinces was relative backward.(3)The results of multiple regression analysis showed that top10shareholders structure of bank had a positive impact on efficiency and to some extent, this paper supported the "active shareholder hypothesis"; from the results of the regression, the improved works in banks promoted the bank efficiency effectively, which showed the corporate governance of Chinese commercial banks had positive influence which we ignored before.Finally, the paper proposes the following policy recommendations:(1) City commercial banks should optimize the system of property rights. City commercial banks in China should actively promote the reform of property rights and gradually improve the bank’s corporate structure. Privatization shareholding structure is an important direction to select the current commercial bank reform.(2) City commercial banks should allocate resources efficiently. The reasons of banks operating inefficiencies are technical factors, followed by workers factors. Technology have the positive effect on bank’s operating efficiency, which is the key point to reduce bank operating costs and improve operating margins. Besides, quality of human resources determines city commercial banks’competitiveness.(3) To accelerate the development of intermediary business is another way to improve efficiency. In recent years, though intermediary business in banks develops rapidly, there is still a big gap between china and developed countries. So accelerating intermediary business in banks is of great importance, such as promoting the construction of the city’s automated clearing system; developing the private banking business; boosting real estate and other asset’s securitization and learning from foreign experience to look for more chances to lay the foundation for future development.