Reform of CMBC Business Department Drove Financial Market Business Boom

2007-10-19

We think that the business department mode is not to build a bank within a bank, but an organizational system that realizes intensive management; the business department mode is not to pursue large and comprehensive, but an institutional innovation implementing specialized management; the business department mode does not give the first priority to independence, but to the streamlined operation, which explicitly exhibits the cooperative spirit; the business department mode is not to seek the interest maximization of departments, but to realize the interest maximization of the whole bank. The objectives of our reform are to set up advanced organizational form and operating mechanism by centering on innovation and focusing on risk control, realize streamlined and digital management and efficient backstage operation support, build up an efficient and energetic marketing team, establish competitive performance appraisal and incentive mechanism, form a professional, diversified and international team in financial market businesses, and create top- ranking performance and management brand.
Question: after the reform of Financial Market Department, how will the integral operation framework and business contents be set up?
Yan Junwei: the financial market business is one of the core businesses of commercial banks, which is an innovative banking business that makes use of diversified financial investment tools and trading modes at domestic and foreign financial markets to conduct proprietary and investment, trading and risk management on a trust basis. It is also a strategic business promoting the management transition of commercial banks. The prime task of the Financial Market Dept. is to largen and strengthen the trading business, bond-financing business according to the volatile market environment and business innovation opportunities, optimize investment structure, develop the market-making business, and pursue new profit source beyond the traditional credit/ debit businesses. CMBC Financial Market Dept. is responsible for the financial market businesses, market risk and operation risk throughout the bank. The positioning of the Financial Market Dept., after the business department reform, is investment, transaction and financing, namely, makes use of fundamental financial tools, such as exchange rates, credit, commodities and stocks, and derivatives in the capital market, currency market, foreign exchange market and commodity market to engage in investment, transaction and financing business, bucks for the maximization of the bank’s profits within the risk budgeting. There are seven business centers under the Financial Market Dept, forming a streamlined operation mode covering investment, transaction, product research and development, product marketing and product management.
Question: as a market maker in the foreign exchange markets and bond markets, how CMBC performs its responsibility as a market maker?
Yan Junwei: in 2007, the Financial Market Dept. carried out a series of reform in its fixed income businesses, separating the trading account and investment account according to international conventions, setting up the trader authorization and risk monitoring system, re-sorting the work flows. In terms and trading style and strategies, it has innovated audaciously and achieved breakthrough progress, which contributed to the bond trading volume increase from RMB 1.3 billion at the beginning of the year to RMB 212.6 billion by the end of September, ranking top among Chinese banks in the market.

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