Analysis Of Sustainable Development Ability Of Rural Commercial Banks

Rural credit cooperatives is the prototype of rural commercial banks, the essence of the reform is through shareholding reform to clear property rights, and under the premise of optimizing financial resources to continue to better serve the "three rural". Through10years of development and exploration of Rural commercial banks, and through comparing rural commercial banks’ developing speed and quality of rural commercial banks to that of the national banking industry average level, we can conclude that, Rural commercial banks have embarked on the path of sustainable development, with respect to rural credit cooperatives. After the shareholding reform, Rural commercial banks not only get more than just clear property rights, but also more inspiration of a new approach to develop.Rural commercial banks start rather late comparing to other banks, and the foundation is weak, in its early development are faced with various difficulties. First, as China’s banking competition intensifies, rural commercial banks faced intense external environment, not just the four state-owned banks and joint-stock banks and city commercial banks, and as foreign banks and other financial institutions participating in the competition, Rural commercial banks have many disadvantages in the competition; secondly, Rural commercial banks have weak foundation, before becoming rural commercial banks, rural credit cooperatives had many problems, such as high non-performing loans rate and internal governance confusion, resulting in that Rural commercial banks face internal difficulties; Finally, because of the vulnerability of the rural economy, the long agricultural cycle, low added value, influenced by external conditions, and with the imperfect China’s agriculture insurance, add to the difficulties that rural commercial banks face to carry out operations. Rural commercial banks are suffering high rate of non-performing loans of rural areas, and bearing a greater regional industry risks. These various factors have hindered the sustainable development of Rural commercial banks.By constructing sustainable development index system of rural commercial banks, and the introduction of special development indicators, this thesis measures the sustainable development ability of rural commercial banks. The index system contains a total of17indicators, and21samples of rural commercial banks and10city commercial banks as a reference sample, and add up to31samples. Using factor analysis, indicators are classified into six factors, these six factors represent the development of rural areas in six aspects, they are:competitive factor, growth factor, profit factor, efficiency factor, safety factor and human resource factor. Each banks’six factor scores add up to the composite score by their weight, and the composite score of31banks are used to rank their ability of sustainable development rankings. By comparing21rural commercial banks ranking, this paper analyzes sustainable development of rural commercial banks from different angles; through comparing10rural commercial banks and10city commercial banks’ composite scores, this thesis analyzes the ability for sustainable development of rural commercial banks and city commercial banks. And in accordance with the conclusions of comparative analysis, this thesis gives policy recommendations to China’s Rural commercial banks to achieve sustainable development.This paper is divided into five chapters as follows.The first chapter is Introduction. This chapter introduces the research background and purpose, as well as research methods and innovations.The second chapter is the overview of sustainable development. This chapter focuses on the definition and evaluation of sustainable development as well as the definition and connotation of enterprise sustainable development and commercial banks, previous research on sustainable development are summarized.Chapter three outlined the development of rural commercial banks. This chapter begins with the current development status of China’s rural finance, and then external and internal environment of rural commercial banks are analyzed, and presented the same character of rural commercial banks and city commercial banks; Finally, rural commercial banks’ development status is analyzed comparing to the banking industry.Chapter four is empirical analysis. This chapter is the core part of this thesis, the sustainable development index system is build, and ability for sustainable development of rural commercial banks is analyzed. This paper selected a sample of31banks, including21rural commercial banks and10city commercial banks. Rural commercial banks and city commercial banks are regional banks, and are joint-stock banks, the two have a lot in common. The purpose of adding city commercial banks is to give rural commercial banks a clear reference. From the aspect of financial, environmental, industrial, institutional and social responsibility,17indicators are selected from these five areas to construct the index system, which represent the ability of sustainable development of rural commercial banks. the use of factor analysis, these17indicators are divided into six factors, representing rural commercial banks’sustainable development in different aspects, these six factors are:competitive factors, growth factors, profit factor, efficiency factor, safety factor, and human resource factors. Through the21rural commercial banks comparative analysis of sustainable development, as well as10rural commercial banks and the corresponding10city commercial banks, sustainable development is analyzed in this chapter.Chapter five is policy recommendations. According to empirical analysis in this chapter is based on Chapter four. By comparing different sustainable development of rural commercial bank with deeper analysis, and comparison of rural commercial banks and city commercial banks for sustainable development ability, this thesis gives policy recommendations for Rural commercial banks to gain sustainable development.If Rural commercial banks to achieve long-term sustainable development, we must start from the following:First, rural commercial banks should regulate internal operation mechanism, actively promote the transition to a modern commercial bank, to improve the corporate governance structure, and strengthen risk management.Second, rural commercial banks need a clear market positioning, and a characteristic strategy. Rural commercial banks should make it clear what business is suitable for it and what is not. While other banks are investing in large-scale enterprises, rural commercial banks should focus on local industries, vigorously carry out business for small and medium businesses to win market space and also make a profit. Third, the reform should adhere to rural services. The essence of the reform of the rural credit cooperative into rural commercial banks is to reallocate the rural financial resources on the basis of clear property rights, which aims to improve rural financial service quality and efficiency. Following this idea, after the reform rural commercial banks should always adhere to the "three rural", and develop financial products to explore a new way to do agro-business. First, rural commercial banks should face the changes in market demand, seize the " three rural" policy of fiscal and tax authorities, regulators and local government departments timely and accurate grasp policy support, identify the main direction. Second, rural commercial banks should improve agriculture-related business systems and processes, by establishing a sound system of agriculture-related businesses and processes, and formulate a set of suitable agricultural credit policies and systems.Fourth, rural commercial banks should change the development mode, such as trying to restructure and merger regional small-scale rural commercial banks. Restructuring, joint, and acquisitions is an effective way to promote the optimization allocation of financial resources, disposal and defuse financial risks, establish a good development platform for the reform and development of the city commercial banks. Adopting the " complementary advantages, powerful alliances " approach, cross-county merger of rural commercial banks or rural credit cooperatives will not only conducive to the rational allocation of assets, maintain a competitive advantage in a wider range of areas, but also conducive to the expansion of business space, creating greater profits.In addition, given the special nature of serving "three rural", a series of state and government policy support are needed, policy support for agriculture in the rural services should focus on enthusiasm incentives, as well as the improvement of agriculture itself mainly on the fragile condition. The policy support should mainly focus on addressing the " high cost, high risk " of rural finance, financial subsidies, tax breaks or incentives of monetary policy should be given to the relatively high cost area, special operations or special institution, and agricultural insurance premium subsidies and other measures to cover agriculture-related financial risks.The contributions of this paper are as follows, first, quantitative meaningful, comprehensive scientific analysis of rural commercial banks is conducted in this thesis; second, sustainable development indicator system suitable for rural commercial banks is constructed in this thesis, adding a lot of regional indicators, such as the deposit share, share of loans, ATM machines coverage and network coverage and so on. Thirdly, compared with the same areas of the city commercial bank ability for sustainable development, the analysis the ability for sustainable development of rural commercial banks has a clear reference. As the evaluation of the ability of commercial banks for sustainable development is still in its infancy, research in this area is still imperfect, coupled with the difficulties of data acquisition, the study of the rural commercial banks is not mature, sustainable development indicators Construction is not very comprehensive, future supplement is needed.