Commercial Banks To Foreign Exchange Risk And Its Management

The globalization of world economy makes the international trade increase surprisingly. The growth of international capital's circulation has greatly overstepped that of world trade that also has surpassed the growth of world economy. These factors make it a tendency that the commercial banks will pay much more attention to their international businesses gradually.With the opening fatherly of economy and finance of our country, our commercial banks are facing a more prosperous foreign market and a more cruel competition of the same trade, especially the competition from the foreign banks. Only to meet the challenge and redouble their effort on foreign businesses, can banks in China survive and strengthen by themselves. However, just like other things, foreign businesses have two-side effects, that is, when bringing commercial banks rich profits, they also raise risks. Because foreign businesses involve transnational settlements and have the feature of valuing in foreign currencies, they make the risks more complex and more concealing. The foreign businesses of our commercial bank are developed quickly, but the risks management is still at a weak stage. Researching the current situation and the management of the risks in foreign businesses has strategic meanings.In chapter one of this paper, three kinds of foreign exchange exposure are defined: transaction exposure, economic exposure and accounting exposure. But the sources of foreign exchange risk exposure in commercial bank are foreign currency trading and foreign asset and liability position. In chapter two, it shows where is the foreign exchange risk from. Commercial banks face foreign exchange risks when their assets and liabilities are denominated in foreign currencies and when Commercial banks take major position as traders in the spot and forward foreign currency markets. In chapter three, it carries on comparative...