The Research On Commercial Bank Innovation Efficiency Under Financial Supervision

Financial system plays the role of the allocation of resources in the whole economy, financial innovation is the powerful motive force to promote the function and improve the efficiency. Differing from the other financial institutions, commercial banks are most closely linked with national economy in the whole financial system and occupy the core position. From the overall national economic level, product innovation of commercial banks has the obvious advantage in saving the cost of financing, refining investment risk, improving the return on investment and improving market efficiency; from the view of commercial banks, the objective of product innovation is to maximize the profit, in order to meet the needs of their own and customers. Therefore, the profitable product innovation is the product of commercial banks adjusting to the financial environment changes.Because of the importance of the financial system, the financial institution has become one of the organizations which sustained the most strict supervision in the economy, commercial bank is one of the financial institutions which is most supervised and regulated. Unfortunately, both past and present, the fact of banking crisis within the scope of world prove that banking supervision is not completely effective. Internationally the description between financial supervision and bank product innovation are expounded from the angle of "crisis driven", but the facts show that the direct result of many bank product innovations is the financial regulatory changes, not to mention the financial supervision leads to changes in the financial environment which triggered the bank product innovation. Especially in China’s commercial banks, compared to Europe and the United States’"excessive innovation",our commercial bank is more of "innovation shortage", this shortage is caused not only by insufficient product development, but also by the immature regulatory environment.This paper first defines the core concepts of financial supervision, financial innovation, the bank product innovation, the performance of commercial bank and the bank product innovation performance; and reviews the theory about financial supervision、product innovation of commercial bank and commercial bank performance evaluation as well as the study of their relationships. This paper explores the motivation of financial innovation and performance changes for commercial banks from the perspectives of financial supervision. And then construct the economic model, comparing the development track of commercial bank individual innovation performance and banking innovation performance under the action of the financial supervision, This paper argued from a creative economic perspective that short-term financial supervision and long-term financial supervision exert different impacts on the innovation of commercial banking products and on the performance of individual banks and the entire banking sector. And found that in the short term financial supervision restrains individual commercial bank’s product innovation, but from a long-term perspective, financial supervision can reduce system risk and the overall risk of banking industry, promote the overall performance of banking by risk decomposition and risk aggregation. On this basis, designed a index system for China’s banking supervision and banking product innovation through the explored study, in the part of empirical research, firstly studied the impact path which financial supervision act on product innovation of commercial bank performance, results showed that regulation is then indirectly affect the overall innovation of commercial bank performance through affecting the product innovation of commercial banks. Based on the above viewpoints, this paper constructs the impact model of financial supervision acting on commercial bank’s product innovation performance from two aspects of time dimension and cross dimension using secondary data publicly available, and studied China’s financial supervision as well as commercial bank products innovation performance, studied the key factor that influenced commercial bank products innovation performance on the depth of excavation combined with the experience of financial supervision and commercial bank’s product innovation. In policy research part, combining the challenges that banking supervision is faced as well as the change and development of China’s banking supervision in post financial crisis era, provided suggestions to reform the direction for China’s banking supervision objectives and put forward the corresponding countermeasures to enhance the performance of product innovation of commercial banks in China from the perspective of financial supervision.