Performance Management System Of ICBC Ningbo Branch-A Research Based On REVA

With the gradual opening up of the capital market and the banking industry, commercial banks in China will be playing significant roles on the world's financial stage together with those outstanding foreign commercial banks. However competitive the exterior environment will be, shareholders,managers and operators of banks have reached a common consensus to take the maximization of value as the ultimate goal of commercial banks. At present, the performance management system with EVA as its core, has been one of the mainstream performance management incentive modes of commercial banks. However, against the sluggish world economy, the European debt crisis and the “new normal" economy of China today, the existing EVA performance management system has been unable to balance scientific incentive, risk management, profitability and shareholder returns.Therefore, it is imperative to introduce REVA to construct a more scientific performance management system, promote commercial banks to establish a new concept of business goals, and guide bank managers and operators towards the maximization of shareholder values while in the meantime improve the competitiveness of enterprises based on balanced risk and capital management.Firstly, based on the status quo of the existing EVA performance management system of ICBC Ningbo branch, this paper conducts an analysis of those established theories of both domestic and foreign performance management systems through literature review. This paper mainly elaborates on the rationale of the domestic and foreign performance management and the applied research on EVA and REVA, which leads to a basic understanding of the EVA and REVA performance management system;secondly, this paper identifies the problems of the existing EVA sub-branch performance management system practiced by ICBC Ningbo branch.Pertinent to these problems, this paper proposes an REVA-centered performance management system by replacing EVA with REVA as a core indicator, supplemented by auxiliary indicators such as REVA return rate and a combined utilization of BSC and KPI. Finally, this paper conducts case studies based on the concrete data from primary sub-branches under ICBC Ningbo branch and made an evaluative comparison between indicators from REVA performance management system and EVA performance management system.The REVA performance management system guides all primary sub-branches to dig out their own potentials and enhance REVA. Apart from enhancing after-tax profits, the focus should be put on reducing capitals at risk, reflecting more objectively the operating conditions of primary sub-branches from the perspective of increased shareholder returns and stimulate operators of primary sub-branches by this mean. Through linking rewards of operators and these indicators of REVA and guiding the operators towards a common goal, the accuracy and comprehensiveness of performance management will be realized.