Blended And Fragmented Banking System

The commercial banking industry has experienced a long development process from Blended to Fragmented, and back to Blended Banking system. Today, blended banking system has regained its mainstream dominance of commercial banking in the global markets, while fragmented banking is still the norm in China. How to acclimate to the global trend after China's entry into WTO is a critical issue for Chinese commercial banks. The article aimed to analyze the differences between two systems and to find out what we could learn from the experience of various countries.First of all, the author introduced some basic concepts of banking systems, and made a comparison of the business scopes between blended and fragmented banking systems. The author then focused on the evolution of the American commercial banking system as well as the development of other countries' commercial banks like Japanese banks and England banks to give us an overview of the banking industry's development history.Secondly, the article analyzed the benefits and drawbacks of the two systems through STABILITY, EFFICIENCY and FAIRNESS standards. From the analysis, we could draw a conclusion that both the blended system and the fragmented system had advantages and disadvantages, the key is to find out which one is more suitable for the particular country.Thirdly, the author reviewed the development of the banking system in China, searched for the historical reasons why Chinese commercial banks are still operating in the fragmented system.In the end of the study, the author provided an outlook of the Chinese commercial banking system in the future. As far as the article was concerned, fragmented system is no longer in-line with the economic and financial development in China. Meanwhile, blended system becomes the necessity of Chinese financial industry in the future. We should adopt a gradual approach to achieving the results according to actual situation in China. The author hereby introduced three approaches. Through in-depth analysis, the author suggested that the best way is to implement blended system through financial holding corporations. The article also researched the detailed paths to change the mechanism of commercial banks from incorporated banks and state-owned banks to financial holding corporations.