The Commercial Bank's Cost Management Based On ABC

It's the first year for 2007 that China fulfills the promises that opening the banking market to foreign countries, while the foreign banks are flooding into China. In contrast to domestic commercial banks, the foreign banks are predominant in the scale of assets, the quality of capital, management, business innovation, service, technology, etc., which are threatening the business of domestic commercial banks. Though having been prepared for 5 years and made a significant progress, the domestic commercial banks still weak when facing the competition from the foreign banks. Moreover, in the modern e-business times, the mass nets of domestic banks have lost its advantage as well. There are many reasons for the domestic bank's weak ability, and one of the most important problems is cost management. The ineffectivity of cost management is a pressing issue needs to be solved.The ABC discussed in this paper is based on the activity analysis. After determining the activity-pool and activity-driver, the ABC allots the cost correctly and makes the product or service reflect the real use of resource and activity. The paper also discusses the ABM & ABB based on the ABC. By analyzing the commercial banks activities, the ABM determines which activities increase the banks'value and which are not; then it can reorganize the activities in a perfect way. Based on the analysis of activities and the full understanding of the needs of customers, the ABB makes the budget of activities. On one hand, it can predigest the budgeting. On the other hand, it makes the budget reflect the market's real needs. Then the ABB helps commercial banks to handle the cost management effectively.The paper includes five chapters: the first chapter introduces the purpose, meaning and framework of the paper, and makes a brief review of the research of ABC and its application. The second chapter discusses the backgrounds of ABC and its differences from traditional costing. It introduces the basic concepts and account principles of ABC, and the ABM & ABB based on it. The third chapter discusses the current situation and deficiency of China commercial bank's cost management, and provides a solution to the problem. The fourth chapter discusses the application of ABC in commercial bank's cost management in two aspects: ABM and ABB. The last chapter is a case study, which presents the actual using of ABCM and ABB.