INVESTMENT BANKING | Cesar Tordesillas, China

ABC launches full fund centralization reform scheme

The new-generation asset and liability management system developed independently by Agricultural Bank of China Limited has been formally rolled out.

This marks the end of the balance fund management pattern and into the new chapter of full fund management with the Head Office as the fund center.

Mr. Pan Gongsheng, Executive Director and Vice President of ABC, said that to adopt full fund management is a practice prevailing in domestic and overseas leading commercial banks, a significant measure for building an excellent large listed bank and an important pillar to improve core competitiveness of ABC. Such management is conducive to effectively transmitting the bank-wide operating strategy, guiding operating behaviors of the whole bank, enhancing the level of asset and liability management, improving fund operation efficiency and completing the performance evaluation system. Therefore, it helps to distribute and manage bank-wide fund resources in a centralized manner and effectively enhance risk control capability and core competitiveness.

As a brand-new fund management method, full fund management can distribute fund, guide operation and manage liquidity and interest rate risks uniformly through the management of all fund sources and uses on the basis of “centralization between income and expenditure” and classified pricing.

Full fund management is an important reform of ABC’s fund management system. Mr. Yang Jirong, General Manager of the Asset and Liability Management Department of ABC, indicates that the full fund centralization reform will product five influences on the operation of ABC: first, in terms of operating concept, it will strengthen the implementation of asset and liability policy, enhance the operation decision-making level and be good to the effective transmission of operating concept. Second, as for branches’ budget, profit of tier-1 branches changes to the sum of net spread between each fund source and use, which is different from the balance pattern. Third, regarding marketing, reasonable FTP can timely reflect fund supply and demand on the market. Front-office personnel should pay attention to the bargaining power and improve the fund use efficiency. Fourth, as for risk management, interest rate and liquidity risks are separated from branches and put under the uniform management of the Head Office, raising higher requirements upon risk management capability of the Head Office. Fifth, in terms of performance assessment, new businesses take uniform prices under the full system, providing a platform for scientifically evaluating the performance of institutions, products, departments and account managers.

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