Application Analysis Of ABC In The Cost Management Of China's Commercial Banks

China has entered WTO for six years. With the cancellation of restrictions to foreign banks, domestic commercial banks, especially the state-owned commercial banks, have to face a more intensely competitive situation. Competitive pressure makes profits from increasing price or market quota becomes more and more hard, and the non-interest incomes have become critically important. So analysis of the profit ability of products (or services) is dramatically important to commercial banks.To analyze the profit ability of products (or services), we have to know the accurate costs of the products (or services), and strive to decrease it as much as we can. In recent years, the development of intermediary business has become an important way to reinforce bank's creative and competitive ability. At the same time, with the diversification of commercial banks'products, the proportion of overhead costs in total costs is much bigger than ever before. Traditional costs calculating methods focus only on quantity-based distribution factors (such as working hours). For this reason, the true costs information is always distorted. To keep on maximizing the profits, the commercial banks have to change their cost checking and management model to seek for way to minimize the products'costs. And only in this way, can costs information for supervisor's price-deciding strategy be accurate.In the late 80's of last century, ABC (Activity Based Costing) has appeared in western countries as a totally new cost checking and management method, and been first applied in advanced manufacture enterprises. ABC is based on"Activity", using the method of"Products (or services) consume Activities, Activities consume Resources"to find the reason of why resource consumption happens (resource driver). Then costs, especially overhead costs are traced to the final products (or services) on the base of Activity analyzing. Compared to the traditional cost checking model, ABC can improve the quality of cost information, and be help to find the reason why cost raises or decreases. So, the information user can take actions to remove"non-value-added"activities and improve"value-added"ones. Thus this analysis will make loss and waste reduce to the lowest level, increase scientificalness and usefulness of the decision, and strengthen the market competitive ability of the enterprise.As an advanced costs checking and management method, ABC has been adopted by a lot of large foreign banks and financial institutes, and great achievements and abundant experiences are already obtained. But there is no application of ABC in domestic banks at present. First, this thesis explains the fundamental theory of ABC, and introduces the application of ABC in foreign countries through analyzing ABC successful case in foreign developed bank. Secondly, associated with the actual situation of our country, the meanings and difficulties of using ABC in domestic banks are analyzed. Based upon these analyses, this thesis narrates the steps of successfully applying ABC in our banks. At last, two examples are put forward to show the process of calculation of ABC and explain its advantages.Since ABC has been introduced to China in the middle of 1990's, lots of domestic advanced manufacture enterprises have already tried to apply ABC, and some successes and experiences have been achieved. Nevertheless, the application of ABC in domestic banking sector is still a vacancy, and the theoretic discusses are deficient too. So, this subject has creative and realistic significance in some extent.