Cutting Operational Cost and Raising Business Performance

Setting the long-term strategy of strengthening cost control and implementing the cost leadership strategy, China Construction Bank (CCB) has established the Cost Control Committee headed by the bank’s President as the body to control cost and approve major cost expenses and developed the general guideline and measures of cost control.

In recent years, as the Chinese financial market gets increasingly open and the market-based trend of interest rate forming squeezes the profitability of banks, CCB, by constantly renovating the operational and management systems, has gradually developed the business philosophy with long-term value creation as the orientation and customers as the focus, established the business performance evaluation system with economic added-value at the core and the budget management system centering around economic capital. As a major tool of cutting operational costs and raising business performance, to strengthen the cost control measures and implement the cost leadership strategy have become a long-term strategy of CCB.

The first meeting of the Cost Control Committee which was held recently outlines the general guideline and measures of strengthening cost control throughout the bank. First, to build the cost control concept among all the employees. Organized by the Cost Control Committee, the cost control concept and cost leadership strategy should be widely promoted throughout the bank. Branches, departments and employees at all levels, especially the management should establish a strong sense of cost saving, take the lead to cut cost expenses and faithfully fulfill their cost control responsibility. Every employee should fully understand the importance of implementing the cost leadership strategy to shareholding commercial banks. Second, to implement the differentiated and classified cost management system. Since the nature and rigidity of the commercial bank’s cost expense are diversified, advanced international cost control theories and technologies should be adopted to rationally control the bank’s total expenses and readjust their cost expense structure. Researches should be launched to develop the differentiated and classified cost management system. Third, to establish the cost control evaluation system. A regular information feedback system on the results of implementing cost control by different departments of the bank should be adopted and related incentives mechanism should be developed so as to form a rational cost control evaluation system. Fourth, to restructure the business processes of cost control. Various business processes related with cost control should be checked and the existing cost control methods should be optimized and consolidated.

Recently CCB kicked off the in-depth analysis of the current state of cost expenses and related business processes and will gradually implement a series of measures to strengthen cost control, including saving the transportation, telephone and car expenses, improving the centralized procurement of air tickets and IP telephone services throughout the bank and reforming the system of using the bank’s cars for business purpose.