| Continuous development of economic globalization and trade marketization has a profound effect on operation principle and operation mode of commercial banks. As competitions intensify constantly, banks urgently need to acquire real cost information about development and supply of products or services. Traditional cost accounting system ignores the connection between products and cost driver, which results in serious distortion of product cost. Meanwhile, intangibility and particularity of bank products as well as simultaneity and diversity of production and consumption also make traditional cost analysis method difficult to reflect real cost of bank products, let alone accurately analyze product profitability. The brand-new concept of activity-based costing can not only provide relatively accurate cost information, but offer non-financial information to improve operation management. Two-dimensional cost view under activity-based costing analyzes activity chain from two aspects:cost assignment view and cost process view to eliminate "non-value-added activity", improve "value-added activity", optimize "activity chain" and "value chain" and finally increase customer value and enterprise value. In addition, product cost information provided by activity-based costing system constitutes the foundation of product pricing and product profitability analysis. Product cost and product profitability analysis under activity-based costing system assist commercial banks in getting realer and more accurate product cost report and carrying out product diversity design more rationally, because the diversity of current commercial bank products result in high cost while attracting customers. Besides, product profitability analysis also points out improvement direction and corresponding measures for commercial banks to increase product profitability.Cost, profit and competition are three issues that commercial banks have to face in operation management. Cost is the foundation of profit. How to utilize, control and manage cost becomes the operation management core of commercial banks in China. As China’s financial management system reform goes deep, interest rate liberalization system reform especially profoundly influences banks’ operation mode. Commercial banks gain reasonable margin income through bargaining with customers. Banks’ profit making space narrows increasingly. The competitions among commercial banks become fiercer and fiercer. The operation behavior and financial product homogeneity tendency of commercial banks are serious. Even if new financial products are developed soon, they will be duplicated by the same industry rapidly. It is more difficult for banks to obtain competitive edge by product differentiation. Hence, commercial banks must enhance cost control, satisfy customers’ diversified financial needs through total cost management and practically boost their value creativity and market competition ability. Moreover, based on enhancing cost management, banks should change extensive operation development mode, introduce brand-new total cost management idea and method, strengthen cost control, overall implement fine management and then improve their profitability in order to remain invincible in competitions.Intermediate business refers to the business that does not makes up of assets and liabilities of the financial statement and is part of non-interest income of banks. Intermediate business plays an important part in western commercial banks. This is partly because it offers various financial services to meet customers’ different demands and will in turn promote the development of asset and liability businesses.Also the intermediate business has many advantages such as lower cost but higher return,lower risk but higher profits.It brought high profit in the developing process of western commercial banks,so we should pay more attention in this area and making it the best use.During the process of our commercial banks, we can see that we have already made a lot of progress and so about the intermediate business development.To some extent, the development of intermediate business has become an important symbol of mordernization of commercial banks.However,our development are much behind western commercial banks,We are still not mature in some kinds of products and service such as consultancy.It’s a great challenge for us to grow from learning through western commercial banks.According to the principle of activity based costing, it adopts many distribution standards to put indirect expense into the product,different from traditional costing method, making the cost of the product more accurate.The topic of this paper is confirmed according to my practical work and the research direction. I work in China Construction Bank and my daily work is to serve customers, trying to know their demands from communication and giving them some suggestions of choosing products. We create a long-term relationship with some of our customers and they often give us some good advice to consider our work.Under the background of macro economy, the central bank has reduced deposit and loan interest rate many times since 2015, and banks’ deposit and loan interest rate spread has become increasingly small. The income from traditional business decreases. There are numerous types of banking businesses. Except traditional deposit and loan business, many intermediate businesses play an increasingly important role in banks’ development process, such as credit card business and installment payment business related to house and car purchase. The products of various banks are similar,when one bank promotes one product into the market, others may follow in a fast speed. This makes the competition more tough among commercial banks. So banks may not gain profits from this way.Banking industry is one of the industries with largest proportion of indirect expenses, and real cost of products cannot be rationally reflected in traditional cost accounting. Hence, appropriate and competitive product price can be made only when cost composition of various products is known. In conclusion, cost management enhancement in the links of developing various businesses is very significant for boosting the profitability of commercial banks and their own competitiveness and bettering developing under the background of interest rate liberalization.This paper analyzes and summarizes typical cases of activity-based costing application in the cost management of foreign commercial banks, and proposes the application steps and precautions of cost management for China’s commercial banks by combining current situation of China’s commercial banks, in the hope of guiding actual application of this method and making our bank remain invincible in horizontal competition. |
