Since its establishment in 1984 as a limited company, it continues to grow significantly over the years. ICBC is currently one of the largest banks in the world by total assets and market capitalization. Being a Chinese multinational banking company, it is one of the big four states owned commercial bank. Its operations are centrally meant to achieve its vision that is to be: An international leading bank with the best profitability, performance, and prestige
Being a multinational bank, ICBC has a well-established customer base. For the last two decades, the bank has made significant progress in serving customers worldwide through services such as Global Service Network and by creating an IT platform for all ICBC branches in China and overseas. It has continually established offices in more than 60 countries spanning six continents, that is, Latin America, Europe, Africa, Asia Australia and America. It has also brought its services indirectly in Africa through buying of shares in banks such as the Standard Bank of South Africa (Anon, 2002). Her customers range from corporations, businessmen, government employees, private sector among others. However, it does not have branches in most developing countries.
The bank has a comprehensive product and service system, for example, Corporations Financing Products, RMB Financial Products, and FX Financial Products among others. The bank solidifies its strength on customer base and continues to maintain its size and position in the business. It also strives to increase the base of its products to favor worldwide customer need. It is also involved in leveraging of local and foreign currency resources and maintains a close interaction of the domestic and overseas branches (Anon, 2002). It also enhances its enterprises in import and exports and also ensures to improve its capability in trade finance and international settlement.
Impacts of regulatory regime on ICBC
After the international banking crisis, China banks such as the ICBC were not significantly affected due to their less involvement in the international financial markets. Most of the top banks in China climbed high on the list of global bank rankings. The good performance of Chinese banks of these banks is demonstrated to some extent of the Chinas strength in prudent banking regulations
The crisis marked the fundamental switch regulatory philosophy from the blind belief in the market forces that called for the stronger hand of supervision of bank activities. The crisis announced the end of error of dominance by Western banks and allowed upcoming or rapidly developing Chinese banks such as ICBC into the market (Anon, 2002). This was especially a favorable opportunity for ICBC to develop her international network and increase her net worth.
Apart from them the crisis, other laws within China has also impacted on ICBCs operations. For example requires that such corporation should have the Social Responsibility sector that has seen to it that ICBC participates in a variety of social activities in China. Such alleviating poverty, providing educational scholarships and promoting research activities in college levels of education in China and internationally.
The ICBC activities in general are also affected by constitutional laws regarding various specifications such as the EFT (Electronic Fund Transfer) compliance, Alternative Mortgage Transfer Parity, Equal Credit Opportunity Act, State Compliance and Bureau Registration System, Purchasers Revocation Rights, Sales Practices and Standards Home Mortgage Disclosure (HMDA) Compliance among others.
Competition faced by ICBC
The Financial Market in China and the rest of the world, in general, is on the rise. Many cities are becoming urbanized, and peoples personal wealth is increasing, and they thus require more financial services. The critical and strategic problem that ICBC faces is the reconfiguration of branch capabilities to match the customer distribution and regional economy. In addition to this they also have to employ rigorous measures to be able to identify and relocate to new high-potential markets (Anon, 2002). It has therefore tailored a methodology that is primarily meant to meet this specific need. This method ensures that ICBC optimizes branch networks and performance. As a result, investments on branch rebuilding and personal allocations are maintained high. The bank is, therefore, able to remain competitive locally, regionally and internationally. The bank is also listed as top in the world as it consists of a good customer base. It also has a diversified business structure, market competitiveness, and strong innovation capabilities.
Profit-Oriented global strategy
One of the most successful ICBC corporate strategy periods is notable from 2001 to 2003. ICBC had different corporate strategies that led to the fast growth of the bank. The bank may have experienced changes in its structure, technology and competitive forces such as those mentioned by Philippe Lasserre in his work Global Strategic Management (Lasserre, 2012). During 2001, ICBC employed two major strategies: Reduction of the benchmark rates for loan and deposits and also in going investing in the global market.
ICBC initiated this process by its renaming the acquisitions it had made from Union Bank of Hong Kong and Hong Kong Stock Exchange. This enabled the bank to invest in more countries by establishing its branches. Also, in the same year, ICBC completed the opening a network of its branches in Europe major cities such as Barcelona, Amsterdam, Warsaw, Lisbon, Madrid, Brussels, and Milan.
At the beginning of the year 2001, ICBC developed a new corporate strategy where it decreased the benchmark interest rates for loans and deposits. Like the global strategy, the reduction of interest rates was intended to increase the profitability of the bank. The reduction of interest rates tactic was also intended to reinforce the global strategy so that ICBC could be accepted in many countries where it established its branches. As a result of the two mentioned tactics to support the ICBC bank global idea, by the end of 2001, the bank reaped an interest income of 2.4% and its net interest spread by 0.17% points (Liaw, 2012). Overall, ICBC bank experienced a 32.5% growth in net interest income.
In 2002, ICBC bank had experienced challenges to due to rising operating costs and loans. These challenges resulted from the strategies that were adopted in the year 2001. The bank experienced operating expenses of RMB 40, 672 million increases of 2.5% as compared to 2001. Loans rose by 11%, and the liabilities were RMB 476,400 million. More so, there was a decline of the undistributed profits by RMB 6,594 million due to a particular provision of 10.85 billion that was made in 2001. The bank had to come up with new strategies that would assist in dealing with the non-performing loans. The owners equity also decreased by RMB 13,139 million in 2002 as compared to 2001.
Information Technology (IT) global-oriented strategy
During the year 2002, ICBC bank adopted a new corporate strategy that would help in achieving the global vision with minimal expenses. ICBC joined the Data Center IT project that enabled the bank to manage an average of 90 million transactions with a peak of 110 million transactions daily. Enhancement of the corporation IT systems was one of the strategies that have taken ICBC far in achieving its vision of becoming a global bank. The technological strategy adopted by ICBC bank was fully in line with the technological progress factor as mentioned in Philippe Lasserre global strategy theory (Lasserre, p. 5, 2003). According to this theory, application of technological progress in modern businesses helps in implementation of globalization in the companies by reduction of transportation and communication costs as well as unit costs of production. The benefits mentioned above are accrued due to economies of scale and localization of productive capacities and sourcing in low-cost economies.
As a matter of facts, this new Information Technology (IT) strategy helped ICBC bank to by improving its competitiveness and catering for the increased market demand. The new system enabled the bank to provide customer-oriented and one-stop services that replaced the traditional product-oriented services (Anon., 2002). Furthermore, the ICBC head office was able to monitor all the branches within and outside the country by use of standardized performance indicators. Also, the new IT strategy enabled ICBC bank to manage the credit risk capabilities through the implementation of the credit information and management subsystems that strictly controlled the standardized credit approval.
The IT system found a wide application in ICBC bank. During the same year, (2002) ICBC bank embraced the unified planning and management principles that would help the bank to enhance its incremental basis program. As more and more customers increased through external investments, ICBC implemented a Customer Relationship Management System (CRMS) that would serve private clients. It also introduced an integrated statement analysis system that enables the bank to provide personalized services to all the customers in various parts of the world (Anon., 2002). CRMS together with the integrated statement analysis system improved the efficiency and accuracy of the management information due to the increased level of automation in management processes. The systems also assisted the management of the bank in making decisions in a more scientific manner than there before.
Competitive factors may as elucidate in global strategy theory by Philippe Lasserre is another factor that forced ICBC Bank to reinforce its global ambitions by adopting internal rating system. The internal rating system is one of the international best practices that enable a corporation to be evaluated by the clients in comparison with other global corporations. Besides, another set of internal rules and measures were established in 2002 (Anon., 2002). For instance the detailed measures on reviewing financial statements of corporate clients, rules for reviewing financial statements of corporate clients and rules for rating real estate developers. The software used for rating enhances the accuracy and the credibility of the financial information used for rating.
Corporate Internal Governance
At the beginning of 2003, ICBC bank restricted its internal governance and a new authorization management system was developed. The new system consists of the Head office and its branches. The subsidiary branches of ICBC bank were required to conduct their business and independent decision making in accordance with the law. The branches were also required to comply with the relevant delegated authority. The authorization system that exists till to date was classified into three categories. At the top are the Executive Vice President, Heads of Head Office departments and the general managers. The senior officials delegate authority to Deputy General Managers, Department Heads of Branches and Branches General managers. This mid category delegates the authority to County branches chiefs, deputy general managers of the branches and the deputy head of offices. A change in the system of internal corporate governance was made so as to cater for the new changes that the company had to make its entrance into the global market.
Overseas Expansion strategies
As a way of implementing its international business strategies and policies, ICBC bank engages in restructuring, merging and acquisition of ba...
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