The Boundaries of Commercial Banks: Economic Functions and Institutional Costs: Economic Functions and Institutional Costs

Author: He Ziyun
Publisher:
Publish Date: 2003-03-01
Features: Commercial banks have also utilized the development of financial markets to continuously introduce new products, such as asset securitization, fund management and advisory, and the design and trading of financial derivatives, thereby regaining a significant number of customers and restoring profit growth. Commercial banks have further leveraged their long-established business advantages, strong reputation, and robust capital background to fully utilize existing high-tech means to expand markets. This has led to the integration of traditional banking and e-banking, creating a complementary effect and achieving remarkable results.
The book The Boundary of Commercial Banks: Economic Functions and Institutional Costs, written by Comrade He Ziyun, elaborates on the theoretical and practical issues of commercial banks from a completely new perspective. The book is divided into eight chapters. Chapter 1 is an introduction, primarily raising questions and explaining the reasons for the survival and development of commercial banks, while defining the commercial banks discussed in this book as "pure" commercial banks under a separated-industry operation system. Chapter 2 defines the concept of the boundary of commercial banks and analyzes its influencing factors, discussing methods for determining the boundary, thereby laying the foundation for the subsequent chapters. Chapters 3 and 4 discuss the economic functions of commercial banks. Chapter 3 primarily focuses on the core function of commercial banks—risk management, while Chapter 4 primarily discusses the auxiliary functions of commercial banks—payment intermediation, money creation, policy transmission, and agency services. These chapters explain that the products and services provided by commercial banks to exercise these functions remain essential to society and cannot be replaced by non-bank financial arrangements. From the perspective of economic functions and social demand, the conclusion is drawn: we still need commercial banks, and their boundary is still expanding. Chapters 5 and 6 primarily discuss the institutional costs of commercial banks, explaining that the relationships between the various cooperative entities within this institutional arrangement are a principal-agent relationship, and that commercial banks are essentially a network of principal-agent relationships. These chapters answer the question of whether we still need commercial banks from the perspective of institutional arrangements: we still need commercial banks because we can enable them to continue performing the economic functions that are still needed by society! Chapter 7 presents an empirical analysis of the boundary of commercial banks, primarily through intuitive analysis and regression analysis of relevant data, as well as an analysis of the flaws in indicators used to judge the role of commercial banks—particularly the defect of total asset size/asset share. This chapter demonstrates that commercial banks have not been eliminated and are still growing stronger, and their role in the economy has not only not declined but is continuously increasing, thereby answering the question of whether we still need commercial banks from the perspective of measurement indicators: we still need commercial banks, and their role is continuously expanding! Chapter 8 uses relevant data from China to estimate the boundary of commercial banks in China, while also elaborating in detail on the cultivation of the core competitiveness of commercial banks in China.