Reform Of Commercial Banks With The Development Of Internal Funds Transfer Pricing Issues - The New Institutional Economics Perspective

FTP arose from commercial banking practice and research on it within banks usually stays in practical operation; foreign theoretic study of interest term structures is abundant, while too much emphasis on quantitative modeling limits its practicability. As an effect, theoretic research and practical operation are detached to each other. Moreover, research on FTP in China dwells in the analysis of conception, principle and function, which is quite immature.Studying FTP completely trough The Theory of Interest would drag it out of practical need; utterly ceasing in practical perspective, on the other hand, would restrain the ability to resolve the sophisticated issues derived from FTP. Therefore, a new perspective, which better combines the theoretic research and the practical operation, is essential. With this belief, the author perceive FTP as an institutional arrangement and reparse FPT from the view point of New Institutional Economics: whether to introduce FTP to centralize the management of market risk is perceived as Institution Selection; Coase Theorem acts as the main instrument when analyzing the composite of trading cost while FTP is implemented; conflicts and arguments derived from adopting FTP is treated as Incomplete Contracting. Thereby a governance mechanism that perfects internal organizational design and development strategy is addressed: A complete and flawless organizational design ensures positive inter-action between FTP and performance measurement; a clear and appropriate development strategy provides criterion to any adjustment or variation on FTP.