How Local Commercial Banks Enhance Their Core Competitiveness In The New Era

Local commercial banks are an important component of China’s banking industry and special groups. Their predecessors were urban credit cooperatives founded in1980s, which have special status in our country and have always been seen as state-owned commercial banks and joint-stock commercial banks after the third echelon. Based on former joint-stock reform of urban credit cooperatives, city business banks were formed through local government’s, city corporations’ and residents’ investment in original urban credit cooperatives. They served local commercial banks. Although they appeared in a late time, they were in a large number, and asserted a great effect. With ten years’development, especially in recent years, many City firms began to restructure, increase their investment, introduce strategic investors and take other measures to develop the momentum of rapid growth trend.With economic development and acceleration of the reform and opening up, the market has witnessed that the domestic commercial banks and policy environment has changed dramatically, old rules in the past have undergone radical changes, the traditional development model of simply relying on the assets and liabilities expansion has been difficult to continue.Thrust from the outside point of view, to achieve business transformation is to enhance the core competitiveness of commercial banks. As the core part of the modern economy, financial sector will change with social economy’s change. In the economic restructuring trend, it is the right time for commercial banks business transformation. The rapid growth of personal wealth and consumption structure required more for financial services of banks, asking the banks to provide special products and services to meet the various needs of the residents. Trends show the impact of financial disintermediation of traditional commercial banking business model, prompting the bank initiative to provide credit, settlement, agency, consulting and investment banking and other combination of integrated services. The improving level of openness of the economy presents the domestic banks a new challenge, but also provides huge opportunities. Full liberalization of the financial sector, interest rates, exchange rates and other market requires banks to speed up the process as soon as possible to enhance the core competitiveness.From the point of internal power, capital hard constraints stimulate commercial banks to change, traditional business model of providing credit business by commercial banks has been unable to meet long-term stable returns required by capital constraints. To break through the bottleneck of capital constraints, commercial banks must find out a way to realize low capital consumption and high-yield. Traditional profit model is unsustainable which makes commercial banks’ determination to reform, to open up new profit space, to transit from a financial intermediary to the versatile role of financial service providers.Therefore, after the financial crises, Chinese local commercial banks and foreign banks should absorb the advanced management experience to strengthen their internal management. Sound corporate governance structure contributes to the formation of the operator’s ownership constraints, contribute to local commercial banks to form property constraint, which benefits establishing "clear property rights, separate right and obligation, separate politics and corporations, scientific management "as the characteristics of the modern enterprise system. Through a right market position and summarization of the local commercial banks’ operation experience, local commercial banks should mainly rely on local government and the local economy, manage money for SMEs and the public, participate in local economic reform and service the development of the local economy to provide comprehensive financial services. It is the right way to serve local, SMEs and the public. Even if in the international competition, our local commercial banks will rely on its unique community cultural superiority in the region to provide quality financial services, becoming an irreplaceable market forces.Therefore, this article on the current situation of Guizhou banks is based on the analysis of the domestic and local commercial banks operating conditions, business model and relevant experience, and is on how to improve the local commercial banks. This paper will briefly describe the research background and significance, based on relevant research. Second, from the perspective of theoretical overview, the basic content and features of core competitiveness force as well as the evolution of the core competitiveness are described. Then starting from the point of industry, this paper writes on the theories of core competitiveness of modern commercial banks and discuss the core competitiveness of modern commercial banking features. Then based on the reality of modern commercial banks, a comprehensive analysis is made on Guizhou banks’core competitiveness. This section is the core and deepening part. Through the description of the Guizhou banks’basic situation, the market analysis of Guizhou banks and problems faced by Guizhou banks, the strategic choices of Guizhou bank’s core competitiveness is explored. Finally, based on the above, this paper will combine theory, industry analysis and Guizhou bank’s core competitiveness analysis, this paper demonstrates the paths and ways to enhance the core competitiveness ofGuizhou banks.In accordance with the above framework, this paper, in the research process strived to avoid the cliches exposition and targeted in the following aspects. First, this theoretical discussion and case studies are based on two aspects of the new situation of China’s commercial banks in some areas by making core competitive strategy which makes regional advantage as the core. Second, this paper, based on basic situation of local commercial banks, does a personalized analysis for Guizhou banks, and makes an innovative discussion on methods and paths to enhance the core competitiveness of China’s commercial banks. Though Guizhou banks are the research object, in the process of analyzing results and shaping core competencies, this paper strives for a certain reference value to the whole country’s local commercial banks.In addition to theoretical and empirical analysis, the paper also sought to integrate time requirements, such as in the introduction of Confucian culture, we hope to be able to adapt to the times and the development trend of attitude in the traditional culture under the guidance of traditional culture, embark on new exploration and operating roads after setting up the bank forward to lead the spiritual and cultural pillars. After this spiritual and cultural pillars established, this article also elaborated that the situation of Guizhou banks can be widely applied to innovative business strategy of local commercial banks, that is, implement appropriate management measures in business transformation, market positioning and risk management.Thus, based the above analysis, research and demonstration, the paper puts forward the corresponding measures to impose against the outstanding problems corresponding measure.First, base on improved and innovative corporate governance structure. This requires banks to establish an effective mechanism of checks and balances, namely the establishment of an independent and effective board of directors, division of responsibilities between the Board and management boundaries and internal audit department supervision. It also requires banks to build capacity dense internal control system, namely the establishment of rigorous scientific internal control system, establish and maintain control and oversight mechanisms and to adapt to business expansion and technological development of the new requirements.Second, strengthen the market position and make operating characteristics outstanding. This first requires management innovation, modernization and streamlining of the organizational structure to realize optimum effect. Secondly it requires humanized, localized and family-oriented services, in order to improve the quality of business development and market influence. Again it requires a flexibility quickness and rationalization, to make full use of local city bank banking’s characteristics. Finally it requests product to be franchised and diversified, and strive to achieve different levels to meet customer demand.Third, the process of innovation is to establish a standardized bank. First, organizational structure should be customer-centered, eliminating traditional departmental boundaries, maintaining high level of division and cooperation of labor, strict internal division and external systematic state as a whole. But the innovation of financial products also needs to be strengthened to meet the market, then starting from the actual situation in China and promoting standardization of service processes.Fourth, it is an innovative marketing system that is a versatile marketing services system, diversified product system, multi-level marketing channel system, high-quality and professional marketing team and high-quality marketing brand system and so on.Fifth, the innovative risk management mechanisms. It requires banks to reshape the risk management philosophy first and recognize and manage risks in a comprehensive perspective, thus improve the capacity of risk judgment and management, catering to interests and requirements of shareholders.Finally, we should cherish talent, establish a scientific evaluation and incentive mechanism. By adopting flexible incentives, incentive systems, the consistency and effectiveness of incentives are to be achieved.This research and analysis focus on the overall development of local commercial banks and the reason for the existence of the problem and an appropriate extension of the current situation, and eventually return to Guizhou banks. Through problem analysis of Guizhou Bank, this paper extends to local commercial banks, culminating in the universal and strong initiatives carried out on the level of analysis and suggests general feasibility of the final conclusion.In this study, as the nascent local commercial banks, Guizhou banks are typical cases and can be found problems, which should be removed before they evolve which is of great importance. This paper focuses on the entire local commercial banking industry from point to surface and takes Guizhou banks as examples, with the hope of enhancing the core competitiveness of local commercial banks.