What is a commercial bank

"Commercial bank" is the English translation of Commercial Bank. In defining this concept, there are different approaches between China and the West. In our opinion, the definition of a commercial bank should include the following points.

First, a commercial bank is an intermediary institution for the granting of credit;

Second, a commercial bank is a profit-oriented enterprise;

Third, a commercial bank is the only financial organization that can provide "bank money" (demand deposits). In summary, the concept of commercial bank can be understood as follows: commercial bank is to operate commercial and industrial deposits. Lending money as the main business, and in order to obtain profits for the purpose of money business enterprises.

The characteristics of a commercial bank are as follows:

(1) A commercial bank, like a general industrial and commercial enterprise, is a profit-oriented enterprise. It also has its own capital necessary for engaging in business operations, operates in accordance with the law, pays taxes according to the rules, and is responsible for its own profit and loss, and it, like other enterprises, aims at profit.

(2) commercial banks and is different from the general business enterprise special enterprise. Its specificity is specifically manifested in the differences in business objects. Industrial and commercial enterprises are engaged in the production and circulation of commodities with a certain value of use; and commercial banks are financial assets and financial liabilities as the object of operation, the operation of special commodities, a currency and monetary capital.

The content of the operation includes money collection and payment, borrowing and lending, and all kinds of financial services related to money movement or associated with it. From the point of view of social reproduction process, the operation of commercial banks, is the condition of business enterprise operation. The difference with the general industrial and commercial enterprises, so that commercial banks become a special kind of enterprise - financial enterprises.

(3) commercial banks are different from specialized banks. Commercial bank business is more integrated, more comprehensive, operating all financial "retail" business (door-to-door service) and "wholesale business", (large credit business), to provide customers with all the financial services. Specialized banks, on the other hand, concentrate only on businesses within a specified scope and provide specialized services. With the financial deregulation in western countries, the business scope of specialized banks is also expanding, but compared with commercial banks, there is still a huge gap; commercial banks have an advantage in business operations.

The concept of commercial bank is distinguished from central bank and investment bank, is a profit-oriented, to raise funds with a variety of financial liabilities, a variety of financial assets for the operation of the object, with the credit creation function of financial institutions.

Definition in terms of auditing standards: a commercial bank is an enterprise legal person engaged in the business of absorbing public deposits, granting loans, and handling settlements, etc., established in accordance with the Company Law of the People's Republic of China (PRC) and the Law of the People's Republic of China (PRC) on Commercial Banks.

Commercial banks usually have the following main characteristics:

(i) operating a large number of monetary items, requiring the establishment of sound and strict internal controls;

(ii) engaging in a wide variety of transactions, frequent and huge amounts, requiring the establishment of a tight accounting information system and the extensive use of computerized information systems and electronic funds transfer systems;

(iii) having a large number of branches and a wide distribution area;

(iv) having a large number of branches and a wide distribution area. (iii) Numerous branches, widely distributed regions, and decentralized accounting processing and control functions, requiring the maintenance of uniform operating procedures and accounting information systems;

(iv) The existence of a large number of off-balance-sheet operations that do not involve the flow of funds, requiring the adoption of control procedures for record-keeping and monitoring;

(v) Highly-indebted operations, with a large number of creditors, and closely related to the interests of the general public, subject to the strict constraints of banking supervision regulations and strict supervision by relevant government departments.

Commercial banks have the following major risks:

(i) credit risk;

(ii) risk and transfer risk;

(iii) market risk;

(iv) interest rate risk;

(v) liquidity risk;

(vi) operational risk;

(vii) legal risk;< /p>

(viii) reputational risk.

Because of the characteristics and risks associated with commercial banks, CPAs should exercise due professional care to minimize audit risk to an acceptably low level.