What Is the Banking Industry?

The banking industry in China refers to the People's Bank of China, regulatory agencies, self-regulatory organizations, and commercial banks, urban credit cooperatives, rural credit cooperatives, and other financial institutions, non-bank financial institutions, and policy institutions established in the People's Republic of China bank.

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Banking industry in China means

Banks are financial institutions that operate currency and credit businesses. They issue credit currency, manage currency circulation, adjust the supply and demand of funds, and handle currency deposits and loans.

The emergence of China's banking industry can be traced back to the Tang Dynasty more than 1,000 years ago. At that time, there were some institutions that concurrently operated silver money, such as didians and quality stores. Later, in the Song Dynasty, there were money museums and money shops.

The China Banking Association released the "2014 China Banking Service Improvement Report" in Beijing on March 15, 2015. This is the eighth consecutive year that the China Banking Association has released the report. The report shows that the services of the Chinese banking industry improved in 2014. The survey data showed that the average score of the bank's comprehensive service satisfaction in 2014 was 76.93 points, an increase of 4.63 points from 72.30 points in 2013.

The report shows that in terms of outlet coverage and function upgrades, as of the end of 2014, the total number of outlets in China's banking financial institutions reached 211,100, and 49 blank financial townships, 2308 urban communities, and 318 small and micro-enterprises concentrated areas were added across the country. With more than 500,000 administrative villages, it has achieved full coverage of basic financial services.

As of March 2015, all branches of 31 banks including Bank of China, China Merchants Bank, and Hengfeng Bank have implemented functional zoning.

It is worth noting that the report shows that Internet finance has brought innovation to the transformation and development of the banking industry. As of the end of 2014, the number of personal customers of online banking reached 909 million, an increase of 150 million; the number of transactions reached 60.846 billion . The number of mobile banking personal customers reached 668 million. There were approximately 36.681 million individual customers of WeChat Bank.

The report shows that in 2014, China's banking financial institutions had 116.795 billion out-of-counter transactions, an increase of 20.456 billion from the previous year; the transaction value reached 133.973 trillion yuan. Rich, convenient and fast, especially Internet electronic financial services, are welcomed by customers, making the average closing rate of the banking industry to 67.88%, an increase of 4.65 percentage points year-on-year. ^[2]

There are many types of banking structures and organizational forms in modern capitalist countries. According to their functions:

Banking Online Banking

The online banking (known as "online banking" in China), which was established worldwide in 1995, is developing with the rapid rise of China's online industry. In 1998, China Merchants Bank pioneered the Bank of China and launched the online banking business first, and then the Bank, China Construction Bank, and ICBC successively launched the business. These online banks, which are different from previous computer applications, enable customers to enjoy uninterrupted banking services 24 hours a day, 7 days a week, without being limited by time and space. Due to the extensive use of modern electronics and information technology, and the deep integration with traditional and innovative business of banks, it will inevitably profoundly affect the micro-management and macro-regulation of China's banking industry.

I. Internet banking will have a substantial impact on commercial banks

Although China's online banking was born and developed on the basis of commercial banks, it is an extension and innovation of traditional banking services. But from reality and

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Looking at the long-term development trend, it will have a comprehensive impact on the commercial bank's business and management concepts, business types, business methods, organizational structures, management systems, and staff.

1. Significant strategic development significance for commercial banks

The technical foundation of online banking makes it flexible and powerful in business innovation. It can not only extend and improve traditional businesses, but also new businesses such as bank-securities integration, passbook stocks, and online payments. And its innovation space is still huge. At the same time, the emergence of online banking, with its flexible and convenient advantages, is being quickly accepted by people, making up for the areas that traditional banking cannot or inconveniently involve, and the information capacity is amazing. It can be expected that the traditional banking industry supports the rapid growth of online banking, and online banking will also promote the sustainable development of traditional banking. Whether it can occupy a place in the field of online banking in a timely and effective manner is not only related to whether it can maintain the existing market share of commercial banks, but also determine its future market structure.

From a practical point of view, the gap between Chinese commercial banks and foreign commercial banks is obvious to all, and it has become a pain in opening the banking market after joining the WTO. However, in terms of emerging online banking technology, we have a small gap with foreign countries, and Bank of China is basically on the same starting line. After foreign banks come in, it is impossible to build the network at once. Therefore, accelerating the pace of development of online banking is also a shortcut and opportunity to meet the challenges of the WTO and narrow the gap with the development of the international banking industry.

2. Urgently require commercial banks to update their management, management concepts and management methods

Online banking has the characteristics of wide coverage, flexible customer operations, paperlessness, and virtualization based on network technology and operations, which have caused the bank's original management concepts and business operations to undergo essential changes. Obviously, we cannot simply apply the existing bank's business and management system. For example, it should shift from the expansion of outlets to the expansion of the network; it is necessary to update the bank's service concept, deepen service standards, adjust the thinking of institution building, cost control, management information resource acquisition and utilization, and actively promote and abandon the management system. More importantly, treat this new thing with an open and accepting attitude.

3. Security and risk prevention are more complicated

Safety and risk prevention are the first elements of the "three natures" of traditional banking operations, and this element has not been diluted in the era of online banking. This is because it faces the open, virtual, loosely managed, and undefended Internet, and it is always subject to the challenges and tests of hackers and network technologies. It has the characteristics of fast risk transmission and wide-ranging influence, as well as operations from bank internal personnel. Sexual risk. Compared with traditional bank security issues, they are more concentrated, specific, and have more risk prevention links. In 1998, the Basel Banking Regulatory Commission classified the risks of electronic banking and electronic money activities into operational risks, reputational risks, legal risks, cross-border risks, and the same credit risks, liquidity risks, and interest rate risks as traditional banks. And market risk. These problems are unavoidable practical problems in developing online banking.

New Issues and Requirements on the Macro-Supervision and Regulation of China's Banking Industry

The purpose of supervision and regulation is to streamline social behavior and promote the development of social productive forces. Supervision and regulation must also consciously comply with social development trends and adjust work methods in a timely manner. In March 1998, the Basel Banking Regulatory Commission launched a report entitled "Risk Management of Electronic Banking and Electronic Money Activities" in response to the development and changes of global electronic banking and electronic money in a timely manner into the scope of banking supervision. Obviously, in the face of the emergence of online banking and the advent of the electronic money era, China's existing supervision and regulation of the banking industry must also be adjusted in a timely and appropriate manner to play its role of regulation and protection. Otherwise, it will only hinder the development of this new thing. Online banking is and will have an impact on many aspects of supervision and regulation of the banking industry and calls for

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With these regulatory changes.

1. Urgent need for a set of authoritative online banking risk and security standards

As online banking reduces the geographical distance of the banking market, breaks geographical boundaries, and makes the banking market and financial markets more closely linked. While this brings efficiency, it also poses new risks. Preventing the domino effect in the banking market is on the agenda. The security authentication methods adopted by the four online banks in China are different, and the country has not yet defined a clear standard for this. There are no corresponding laws to restrict and protect the operation of online banking, and it will be difficult to determine many of these behaviors and rights. A series of business types of online banking also need to be confirmed. Facing the development of online banking, who is the referee? How is the referee? How to ensure the authority of online banking technology security? Determine what kind of online banking market access standards and mechanisms? And so on. The existence of these problems not only poses new tasks to the relevant national regulatory authorities, but also plagues the continuous and healthy development of online banking.

2.The speed of social currency circulation will gradually change

In the era of online banking, due to the increased efficiency of corporate and personal capital transfers, the transit time of social funds has been greatly reduced. There is no doubt that under the same condition of the total amount of money, the multiplier effect of money is amplified, and the direct result is to expand the social money flow for a certain period of time. In this regard, the central bank should be given sufficient attention to strengthen monitoring and enhance the accuracy of formulating monetary policies.

3. Calling for adjustments to the regulation and content of the banking industry

The central bank's existing supervision of commercial banks is mainly aimed at traditional banks, and the focus is on implementing measures such as the increase and decrease of bank institutions' network indicators, and the inspection and audit of business vouchers and statements. In the era of online banking, even traditional businesses are increasingly based on electronic and networked foundations. The increase of institutional outlets is not very important; the paperless payment of accounts, the abstraction of the processing process, and the substantial increase in business volume have greatly reduced the existing supervision methods in terms of efficiency, quality, and radiation. The authenticity, comprehensiveness and authoritativeness of regulatory information face testing challenges.

As online banking is a product of electronic and information technology, banking innovation is accelerated. The new business types mostly broke the existing banking supervision policies and regulations, such as bank cards, bankbooks, passbooks, and online payment settlement. These businesses are loved by society. In this regard, it is not possible to require new online banking business to be adequately implemented; to apply existing regulatory and regulatory standards. The central bank must take the initiative to study the new situation and adjust the existing rules to prevent "changing without change". Otherwise, it will only restrict and hinder the development of online banking.

Banking overseas expansion

On November 12, 2007, the Federal Reserve approved China Merchants Bank's application for setting up a branch in New York. This is the first Chinese bank approved in 15 years to establish a branch in the United States. It is expected that applications from Industrial and Commercial Bank of China and China Construction Bank to open New York branches will be approved soon. Since October 2007, Minsheng Bank and Industrial and Commercial Bank of China have successively released news of mergers and acquisitions in overseas markets, and Bank of Communications Frankfurt, Macau Branch, and Industrial and Commercial Bank Moscow Branch have also opened.

In 2006, the Chinese bank's foreign direct investment amounted to US $ 2.58 billion, and ICBC's acquisition of South African Standard Bank amounted to US $ 5.46 billion.

The tide of overseas expansion of China's banking industry has arrived. However, the rapid pace of development does not imply high risks.

Motives for China's Banking Industry's Overseas Expansion

From the internal environment, the rapidly improving operating conditions have provided capital guarantee for the current overseas mergers and acquisitions of the Chinese banking industry. After the change since 1998

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The major indicators of China's banking industry have been greatly improved. As of the end of June 2007, the average NPL ratio of ICBC, Bank of China, China Construction Bank and Bank of Communications was 3.3%, and the average NPL ratio of 12 joint-stock commercial banks was 2.8%. In terms of capital adequacy ratio, the number of banks reaching 8% has increased from 8 in 2003 to 135. In the first half of 2007, Chinese banking financial institutions realized an after-tax profit of 254.43 billion yuan, which has reached 84% of the full-year profit in 2006.

Through the Chinese government's capital injection and listing financing, Chinese commercial banks have raised a large amount of funds. Since 2003, Central Huijin has injected USD 22.5 billion, USD 22.5 billion, and USD 15 billion into the Bank of China, China Construction Bank, and ICBC on behalf of the Chinese government.

In November 2006, ICBC was listed on the Shanghai and Hong Kong securities markets at the same time, raising US $ 22 billion, providing capital for its overseas expansion. Previously, CCB, Bank of China, Bank of Communications, Minsheng Bank, China Merchants Bank, etc. have all been listed.

The current situation in the international financial market is conducive to the large-scale overseas expansion of the Chinese banking industry. The subprime mortgage crisis has impacted a large number of foreign banks, and Bear Stears and North Rock have begun to contact CITIC Securities, ICBC and Bank of China to seek each other's acquisitions. The continued depreciation of the US dollar against the renminbi has also made it more favorable for Chinese banks to acquire foreign banks. Of the 25 banks with the largest deposits in the United States, 8 have been acquired by foreign investors, which is twice the amount five years ago.

The Chinese government is also vigorously promoting the "going out" of China's banking industry. Zhou Xiaochuan, governor of the People s Bank of China, said: Encourage conditional commercial banks to set up and develop overseas institutions, including exploring ways to participate in overseas financial institutions through mergers and acquisitions, and provide convenient financial services for 'going global' companies. Foreign-invested commercial banks have set a very low threshold for overseas expansion: the capital adequacy ratio is not less than 8%; the balance of equity investments does not exceed 50% of their net assets in principle; the continuous profitability of the last three fiscal years; the asset balance at the end of the year before the application It has reached RMB 100 billion or more; it has legal and sufficient sources of foreign exchange funds; corporate governance is good, and internal control is sound and effective.

China's financial environment has also made overseas expansion a strategic priority for Chinese banks. The broad money supply M2 has increased from 25.8 trillion yuan in early 2005 to 39.3 trillion yuan in September 2007. Excessive liquidity makes China's financial system urgently need to find investment channels. In order to curb the overheating of the Chinese economy caused by excess liquidity, the Chinese government has repeatedly adopted austerity policies such as raising interest rates and increasing the reserve ratio, which has prompted the Chinese financial sector to shift its focus to foreign markets.

Foreign strategic investors in China's commercial banks have provided effective support for the Chinese banking industry to go global. As a strategic investor of ICBC, Goldman Sachs served as financial advisor to ICBC's stake in African Standard Bank, and played an important role in the selection of M & A objects and specific transaction arrangements. As a strategic investor of the Bank of America (Bank of America, Bank of America), in order to integrate the Asian business of the two parties, it facilitated the successful acquisition of Bank of America Asia. It was under the advice of strategic investor Royal Bank of Scotland (RBS) that BOC would consider entering the aircraft leasing industry.

Low-risk expansion strategy

The basis of China's banking overseas expansion is rising overseas demand. The financing needs of Chinese foreign-invested enterprises have given Chinese banks a customer base for overseas development and will not compete positively with foreign banks. In 2005, according to an International Finance Corporation (IFC) survey, 58% of Chinese outbound investment companies stated that they had difficulties in obtaining financing, and 77% of them wanted long-term and medium-term financing. According to statistics, in the past four years, China's offshore banking and international financing business has maintained double-digit growth each year. For details, please refer to the "Forecast and Investment Strategic Planning Analysis Report of the Chinese Banking Industry".

The geographical development of China Commercial Bank s overseas development strategy also reflects its ability to meet the needs of Chinese customers overseas business. Ministry of Commerce

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According to the Statistical Bulletin of China s Foreign Direct Investment, 90% of non-financial investment in China s overseas investment is distributed in Latin America and Asia, with Hong Kong, the Cayman Islands, and the British Virgin Islands accounting for 81.5%.

Due to Hong Kong's important position in China's overseas investment and trade, the Bank of China, ICBC, and China Construction Bank all regard Hong Kong as the origin of their overseas expansion. ICBC, China Construction Bank, and Bank of Communications all consider Asia as their expansion in their overseas strategic plans strategic focus.

The huge demand of Chinese enterprises for resources such as energy and minerals has promoted their investment in resource-rich regions such as Africa. The entry of the Bank of China can provide support for Chinese enterprises.

In response, ICBC and Standard Bank of South Africa will set up a $ 1 billion global resource fund to capture the rapid development of the South African energy market. Low-cost financing will help Chinese companies succeed in competing for natural resources.

The Chinese banking industry attaches great importance to adapting its own capabilities to overseas expansion methods, and adopts a combination of mergers and acquisitions and new establishments in accordance with different market environments.