Letter Of Credit Business Of Commercial Banks Risk Prevention

This article is written based on one clue, which is the method for commercial banks to avoid the risk of Documentary Credits business under the new international practice (The Uniform Customs and Practice for Documentary Credits ICC Publication No.600) .UCP600 modified the structure of UCP500, and organized all articles according to the processes of Documentary Credits business. This article follows the structure of UCP600 to discuss the detail rules of UCP600 on the processes of issuing Credits, Amendment, Negotiation, Examination of Documents, as well as what kind of risks the commercial banks face in these processes and how do they avoid them.This article focuses on the latest developments in international law and international finance fields, uses many real cases to illustrate risks which banks face. Except that, this article also analyzes the definition of risk of Credits, the reason of occurrence from the law angles, and the law theory in the processes of Credits business.The paper contains four parts. The first part generally introduces the risk of credits, including the definition of risk and reason of occurrence. When I discuss the reason of occurrence I also bring forward the characteristics of Credits. The second part till the fifth part is about the specific analysis of risk in each process (Issue, Amendment, Negotiation, Examination of Documents) of Credits business and the methods to avoid it.These four parts are parallel, but the content of each part is deeper and deeper. In each part, firstly I introduce the important legal issues about this process and the risks existed. Then I analyze the regulations about this process in UCP600. After all absolutely understanding about the international custom is the first step to avoid risk. The last I bring forward the method to deal with risk combining some real dispute case.