Study On Operational Risk And Prevention Of Letter Of Credit Business Of Chinese Commercial Banks

Originally, Operational risk did not get enough attention as credit risk and market risk, Until it has led a lot of excellent financial institutions suffer large losses over the past 20 years, Even some financial institutions have therefore declared bankrupt, that result in the banking system had to prepare to solve the operational risk issues. Basel II Capital Requirements included the operational risks in the frame of calculating the regulatory capital, which Caused widespread concern in the financial sector, this reflects the international financial community’s focus on operational risk, and operational risk is getting more and more attention from regulatory authorities and commercial banks. Recently, lots of operational risk incidents of L/C happen in Import and export business in China, which brought huge losses to he banks. Therefore, analyzing and studying the operational risk of L/C is of great significance.Firstly, this thesis analyzes how the operational risk in the business of L/C formed in our commercial banks from aspects of internal factors, staff of banks, technology and external factors. Secondly, analysis some specific cases of carious processes of L/C, illustrate the importance of L/C control and operational risk prevention. Finally, Based on the combination of China’s commercial banks on operational risk management framework, this article describes the operational risk management and management tools, and proposed specific suggestions to prevent operational risk, such as establish self-assessment system, establish risk management reporting system, establish the risk of loss reserve system and establish operational risk reward system.