Analysis of the difficulties my country's banks are facing and their causes

1. What is a commercial bank?

Commercial banks are the main body of the banking system. They absorb deposits and grant loans. As its main business, it is for the purpose of profit, and it is also the only financial intermediary institution that can absorb and create deposit currency. Since such banks rely on demand deposits as the basic source of funds for issuing loans, and this short-term source of funds is only used to operate short-term commercial lending business, they are called commercial banks.

II. Nature and Characteristics of Commercial Banks

Commercial banks aim to obtain profits, deal with a variety of financial assets and financial liabilities, and have comprehensive service functions. Financial enterprises, also known as banking enterprises. This fundamental nature of commercial banks determines that commercial banks have the following important characteristics:

First, commercial banks aim to make profits and have the basic characteristics of general enterprises.

Second, commercial banks are special enterprises that deal in currency. This is the fundamental feature that distinguishes commercial banks from ordinary enterprises.

Third, commercial banks cannot issue currency, which is a key feature that distinguishes commercial banks from central banks.

Fourth, commercial banking services are highly comprehensive and have more comprehensive functions. This is a significant feature that distinguishes commercial banks from other financial institutions.

3. Analysis of the difficulties and causes faced by my country’s commercial banks

After nearly 10 years of development, commercial banks have gradually matured. Although their development levels vary, some A considerable number of commercial banks have completed joint-stock reform, and through various channels have gradually digested historical non-performing assets, reduced non-performing loan ratios, transformed business models, and occupied a considerable local market share. Among them, Bank of Shanghai has developed rapidly and has become one of the top 500 banks in the world. City commercial banks are gradually developing into a banking class with a considerable number and scale in my country. Together with the four major state-owned banks and 14 joint-stock commercial banks, they form a pattern of 4, 14, and 113 in my country's banking industry. However, with the continuous development of our country's economy and the deepening of financial reform, some urban commercial banks are facing a situation of being marginalized, and their relative lack of competitiveness is the direct reason that restricts their development.

(1) There are certain historical reasons for the lack of competitiveness of commercial banks.

The formation mechanism of commercial banks is complex and their growth space is relatively narrow. Most of the existing commercial banks were reorganized from cooperative local financial institutions - credit unions. The "nature of cooperative financial institutions" of credit unions makes their property rights structure very unclear, management irregular, insider control problems very serious, and credit risks accumulated in large quantities. In order to prevent and resolve the above problems, on March 13, 1998, with the consent of the State Council, the People's Bank of China and the State Administration for Industry and Commerce approved the opening of 112 city commercial banks one after another and the merger of 2,290 credit unions. After the reorganization, the property rights structure of commercial banks has gradually become clearer, and management has gradually become more standardized. However, due to factors such as heavy historical burdens and special equity structures, commercial banks have poor overall operating conditions, poor asset quality, serious insufficient capital, and large losses. Facing huge risks, a considerable number of commercial banks have negative capital adequacy ratios and are in a state of "technical" bankruptcy. After years of reform and development, most commercial banks have undergone great changes. However, compared with many state-owned and joint-stock banks, there are still many problems in operation and management, and they lack competitiveness.

(2) The governance structure is still imperfect

Currently, many state-owned shares and legal person shares in my country's banking industry are still in the "limited circulation period", although the proportion of tradable shares of each bank is increasing year by year. trend, but the era of full circulation has not yet arrived. In particular, the proportion of circulating shares of state-owned commercial banks such as ICBC and China Construction Bank is still relatively small. On the other hand, the largest shareholder of my country's commercial banks is currently mainly state-owned shares, and we currently have the problem of insufficient exercise of the power of state-owned shares: the management functions of state-owned shares are scattered in various departments. For example, the appointment and removal power of commercial bank management is controlled. In the hands of the China Banking Regulatory Commission, the personnel department is responsible for the salary system, and the Ministry of Finance is responsible for the management of state-owned assets. This leads to the phenomenon that state-owned shares are nominal shareholders but lack full shareholder rights.

(3) Capital adequacy ratio is still not high

Currently, although the capital adequacy ratio and core capital adequacy ratio of my country’s commercial banks have reached the regulatory authorities’ 8% and 4% requirements. But it is still far from the 14% stipulated in international agreements. At the same time, with the rapid growth in the scale of bank capital business, risky assets continue to increase; external mergers and acquisitions are active, and capital consumption is large. A higher capital adequacy ratio provides a prerequisite and potential for banks to expand their business scale, otherwise it becomes a bottleneck. It can be seen that insufficient capital is still a prominent problem in China's banking industry. During the crisis and the economic downturn faced by China's banking industry, it should continue to improve its capital adequacy ratio, expand the growth space of asset scale, and lay the foundation for further profit growth.

(4) Interest spread income is still the main source of profits for banks

In recent years, although the intermediary business income of my country's commercial banks has grown rapidly, its proportion in the total income of banks is still low. , the role of interest income as the main channel of total income is difficult to change in the short term. From 2006 to 2008, the intermediary business of banking financial institutions nationwide grew at an average annual rate of 55.2%, but by the end of 2008 it only accounted for 10.01% of total revenue. Although there was a substantial increase in the first half of 2009, it still only accounted for 16.33%. Net interest income from loans accounted for 73.6% of total income. Since loans are the least liquid assets, banks' excessive reliance on interest margins for income represents potential liquidity risks. Intermediary business income basically does not constitute risky assets and does not occupy capital. Therefore, expanding intermediary business and vigorously developing personal financial management business is an inevitable trend in the development of my country's commercial banks. Especially since 2009, my country has been in an interest rate cutting cycle, the net interest margins of commercial banks have narrowed, and banks are facing the challenge of declining profits. Market share has shrunk, bank credit spreads have narrowed, and bargaining power has weakened. Continuous interest rate cuts have caused market yields to drop sharply, and money market interest rates and bond yields have dropped accordingly. If commercial banks continue to use net interest spreads as the main source of income, their development will be in trouble. Dilemma.

(5) Serious product homogeneity and insufficient innovation capabilities

When banks compete for the blue ocean of intermediary business in the industry, the outstanding problem is product homogeneity. Seriously, this has also resulted in the inability to effectively develop the intermediary business of my country's banking industry. Take bank cards as an example: Nowadays, all banks’ bank cards are “one card”: one card for multiple accounts, universal deposit and withdrawal, agreed transfer, electronic banking, commodity consumption, self-service transfer, agency issuance and deduction, bank-security link, etc. etc., to some extent, they are all imitations of China Merchants Bank’s “All-in-one Card”; in addition to the homogeneity of products, the promotion is also homogeneous: Bank A announced that as long as you open a credit card, you will receive a Swatch watch, and Bank B’s credit card will not charge an annual fee. , and also comes with insurance. When applying for a credit card from Bank C, you can receive a high-end mobile phone with a market price of 5,000 yuan. There is a serious phenomenon of following the trend: you launch an "Air China Card", and I will launch a "China Southern Airlines Card". If you launch a "True Love Card" for women, I will invent a "Beauty Card". These phenomena fully illustrate the current way of thinking from the inside out in the banking industry. Although there are motivations and ideas for innovation, the right direction has not yet been found on how to innovate.

(6) Lack of professional talents in banks

Professional talents can not only improve service quality, but also enhance the comprehensive utilization efficiency of bank resources and reduce costs. Judging from the above operation and management indicators, the current talent efficiency of my country's commercial banking system is not high. According to relevant data, my country's listed banks currently have a low ratio of employees with graduate degrees or above, and joint-stock commercial banks are in slightly better shape than large state-controlled banks. Generally speaking, there is a shortage of talents in my country's banking industry, especially high-level talents. The overall quality of the workforce is low, which has become an important factor affecting the competitiveness of my country's banks. Since the subprime mortgage crisis, my country's commercial banks have frequently suffered losses in overseas investments, which fully reflects the problem of the small number of financial talents in my country's banks, poor investment vision and poor ability to operate financial products. However, the training of banking professionals is still in its infancy in China, which has seriously affected the competitiveness of commercial banks.

(7) A large number of loans cannot be recovered, and institutional credit risks have not fundamentally improved

Although the state has divested state-owned businesses by establishing financial asset management companies and implementing debt-for-equity swaps and other measures There are approximately 1.5 trillion yuan (RMB) of non-performing loans in the banking system.

However, the amount of existing non-performing loans is still huge. It is estimated that overdue, sluggish and bad debt loans in the national commercial banking system still account for about 10% of total assets. About 300 billion yuan of credit funds are difficult to recover, and a considerable part of them are bad debts. In addition, incremental loan risks continue to accumulate, resulting in a large number of non-performing incremental loan mechanisms that have not been fundamentally reversed.

(8) Imperfect systems make commercial banks prone to legal risks.

On the one hand, the laws and regulations are not perfect. With the promulgation of the People's Bank of China Law, the Commercial Bank Law, the Negotiable Instruments Law, the Guarantee Law and the "General Principles of Loans", the financial industry has entered a sound track of legal management and operation. However, many normative documents still contain a considerable amount of content that is not in line with international standards and does not meet risk management under realistic conditions. The lack of rules and regulations makes the internal risk prevention of commercial banks lose its soundness. In addition, there is a lack of a reward and punishment system with appropriate rewards and punishments, and there are no clear penalty provisions for those who violate regulations and disciplines. For example, for many years there has been no clear penalty system for losses caused by loan officers, resulting in a disconnect between responsibilities, rights and benefits. On the other hand, the low free behavior of the system executors and the insufficient investigation and punishment of violations of rules and disciplines have caused the problem to continue to spread. The failure to punish violations and the difficulty of finding the rules have caused the internal control of commercial banks to lose their seriousness and operability. For example, the asset-liability ratio management system and the asset risk management system are repeatedly emphasized and required by the "Commercial Bank Law". However, because the system is too advanced in theory and is divorced from the current situation of low asset quality of commercial banks, it results in the actual implementation process. Unable to operate. In addition, with regard to employees, especially leaders, the restraint on behavior has been softened, and a few deformed president responsibility systems actually have power but no responsibility, which not only increases the power of the top leaders, but also makes the system that restricts leaders a tool for them to seek power for personal gain.

In short, my country’s commercial banks started late and have difficulties in many aspects, both objective and subjective. However, they have made great progress than before. I also believe that the future of my country’s commercial banks It is far-reaching and bright.