Export-import Bank Of China Branch In Chengdu, Import Letters Of Credit Risk Research

With the development of global economy, RMB continuous appreciation as well as the announcement of Chinese import credit policy, Chinese import trade is boosting. Letter of Credit, one of the major measures of international settlement, is widely used and it dominates international settlement, particularly trading of commodities.As an important force in promoting foreign trade and economy and a significant component of the financial system, China Eximbank Chengdu branch has been acting as a key channel of policy financing for both imports and exports of mechanic and electronic products, complete sets of equipment, and high- and new-tech products and undertaking offshore construction contracts and overseas investment projects by Chinese companies in Sichuan Yunnan Guizhou and Tibet four provinces.Based on the abundance of related data, cases, theories, this paper analyses the existed risks in the operation of import letter of credit in China Eximbank Chengdu branch on the perspective of the issuing bank. Furthermore, it demonstrates several reasonable advice and future plans through the analysis of the precedents.Structurally, there are 5 chapters in this paper.Chapter 1 of this paper is the introductory remarks, mainly dissertating the following issues:1. The purpose and meaning of the study on this paper; 2. The angle and method of the study.Chapter 2 introduces China Eximbank and its core businesses, specifically, Chengdu branch and its intermediary business, details the introduction of Letter of credit for the business of Chengdu branch:1.The characteristics of import L/C business of Chengdu branch:highly related to import credit business; significant way for the capital management after finance; The vital source of profitable income of policy bank; being able to drive the development of various businesses of Chengdu branch; It involves many management departments.2. The characteristics of the import L/C applicants of Chengdu branch:the applicants are mostly the borrowers of Chengdu branch; applicants are mainly national large/medium enterprises, applicants are highly centralized, applicants from other cities occupy a high percentage.3. The procedure of import L/C transaction:includes the division of tasks among departments; The key points for credit line; focuses on the application of import L/C and issuance, amendment, presentation, examination, acceptance and payment, cancellation and withdrawal, and the release of L/C bail, which are several important parts of the whole procedure.In Chapter 3, there has been a detailed analysis of the three main risks in import L/C business in Chengdu branch:1. Fraud Risk, explains the definition, the motive and most common forms of L/C fraud risk, and integrating with the current situation of Chengdu branch, it analyses in detail the cases of beneficiary's fraud and applicant's fraud.2. Risk of delivery of documents, explains the documents delivery section in the import L/C. the documents delivery requirements in UCP600 and special features of the delivery system in Chengdu branch:large part of the deliveries have been done by courier which have a higher risk compared with other delivery methods. Analyses particular cases of document delivery under Chengdu branch's background:the dilemma of the issuing bank before the deadline.In Chapter 4, in view of the existing risks in import L/C business of Chengdu branch, it brings forwards reasonable suggestions and future plans:1.strengthen the establishment and implementation of internal control regulations, achieve "Three lines of defense" internal control management system.2. Grounded on the close relation between import L/C and import loan, it is necessary to classify import L/C risk management into loan risk management.3. Enhances the human resource procession construction, ensuring that the branch is on the right and stable track of development.4. Future planning:Increases the number of branches, boosts the establishment of internet network system, and develops the e-L/C business.The good points of this paper are:1. Firstly, it systematically analyzes the risks for the issuing bank from its perspective.2. Puts forward that import L/C risk management is classified into import loan risk management. Partly transforms the long term import loan risk management into short term L/C risk management, providing more measures for credit management.There are a few shortcomings in this paper:1. Due to internal confidentiality, all the data related to China Eximbank is from the public reports, and not updated.2. All the cases are modified, some cases are from other banks, but there is a possibility that it might happen in Chengdu branch's future business.