Research On The Financial Risk Of Chinese Commercial Bank Introducing Foreign Strategic Investment

Thirty years of reform and opening up, China’s banking industry has experienced from the reform, development and now stepping into mature. But As China continues to increase the level of internationalization, with the enormous success achieved in banking industry, our country is now facing the growing market competition from internal and external. From current situation, although China’s commercial banks have had a rapid development, compared with outstanding international banks there still is a large gap in the management level and operational efficiency. Also, competitions among banks are mostly limited in the internal market, lack of long-term vision of going out. Therefore, from the end of90s’, there’s a growing number of China’s commercial banks who chose to introduce some excellent foreign strategic investment institutions, to embrace the fresh blood in order to absorb advanced management mechanism and enhance their overall competitive strength.However, according to current situation of some foreign strategic investment institutions gained a high return by selling china’s bank shares, the introduction of foreign strategic investors to China’s commercial banks is a big controversy and it has been widely studied and discussed by the academia. Some researchers have studied this issue from the aspects of corporate governance structure, operational efficiency and etc. They believe the foreign strategic investors would have positive effects to improve the corporate governance structure and operational efficiency of China’s commercial banks. Other researchers believe the speculation is existed among foreign strategic investors, which will harm China’s financial security. So, as for China’s commercial banks, what impacts there will be to introduce the foreign strategic investors? For China’s banking industry, what risks should we pay attention to and try to avoid of? This article attempts to study this issue from the aspect of financial risk, and answer above questions.This paper combined the background of China’s commercial banks introducing foreign strategic investors and relevant theory analyses, take the introduction of Deutsche Bank’s investment of Hua Xia Bank as an example, study the impact of introducing foreign strategic investors to the financial risk of China’s commercial banks. This article will discuss the title from below aspects:Part1:Introduction. Bring forward the meaning of this title, purpose of study, determine the research method by briefly introduce and analyze the situation of China’s commercial bank and the background of the introduction of foreign strategic investors. Meanwhile, describes the expected contribution..Part2:Literature Review. This part will begin with2fields that are commercial banks’ risk management studies and the introduction of foreign investment studies. Then summarize a large number of domestic and foreign research results for each field and provide some theoretical support to research ideas and case studies in this paper. Base on above researches, summarize and analyze the result of financial risk studies regarding China’s commercial banks introducing foreign strategic investors, and provide theoretical support for the view statement of this article.Part3:Theoretical analysis of the financial risk of commercial banks. This part mainly discusses the definition, types and factors of the financial risks of commercial banks. By recognizing and sorting the financial risks of commercial banks, we could identify the types of financial risks and build the theoretical foundation for financial risk index system.Part4:The analysis of the background of China’s commercial banks introducing foreign strategic investors and relevant theories. This part takes the definition of foreign strategic investors and the background of China’s commercial banks introducing foreign strategic investors as the starting point, analyzes the relevant theoretical foundation of introducing foreign strategic investors, including the corporate governance theory, commercial bank risk management theory, the theory of sustainable development of commercial banks, etc. And investigate the impact of the introduction of foreign strategic investors to China’s commercial banks according to the current status.Part5:Case analysis. Combined with relevant theories of commercial banks’ financial risks, this article build a financial risk evaluation index system in accordance with the classification of financial risk. Draw conclusion to the case by determining the data analysis period, calculating the index results, comparing and analyzing the financial risks indicators of commercial banks before and after the foreign capital. And then evaluate the result.Part6:Conclusion and advices. Summarizes this article’s main conclusions on the basis of case studies and theoretical research, depends on which propose the improvement suggestions from both macro and micro levels to commercial banks who are managing the financial risks while introducing the foreign strategic investors.The major contributions of this article are as below:Firstly, domestic and foreign scholars’researches regarding commercial banks’risks mainly focus on2aspects:building the risk prediction model and the risk evaluation system. And most researches about introducing foreign strategic investors are analyzed from the aspects of banks operating efficiency, governance structures, etc. This article takes the financial risks of commercial banks as the starting point, provides some reference value to risk prevention and control of commercial bank based on internal and external theories of commercial bank regulation systemSecondly, by building risk evaluation index system for commercial banks, this article evaluate and analyze the financial risks of the introduction of foreign strategic investors in commercial bank. Provide some reference value to building the financial risk management system for China’s commercial bank. Meanwhile, it also provides some reference to the relevant theoretical research.Thirdly, this article did a detailed research regarding the introduction of foreign strategic investors of commercial bank, provides some political advices which are considered from the aspect of financial risk control to government departments and regulatory institutions regarding the financial risk control issue in bank industry.The inadequacy of tin’s article is that the case study is special yet common among the industry. It may not represent the overall situation of bank industry introducing foreign strategic investors. The considerations of building the financial risk evaluation may be not comprehensive enough and the selection of index may be not complete enough. And as the author’s knowledge and capability is limited, there may be some problems like the research is not comprehensive enough or the statement is not clear. The research will be continued in the future to get it refined and improved.