Risk Management For Letter Of Credit In International Financing Of Commercial Bank

With economic globalization and the enhancement of international level, the development of China’s international trade has made great progress. The international trade has played an impartment role in the growth of our national economy, and has opened broad markets to the financial business. However, if the control measures for the financing of international trade are not properly regulated, the native banking industry may face enormous threats. Letter of credit provides a payment guarantee for the bank. It is more secure compared with other financing measures, and could be accepted by both sides of the trade. However, commercial banks still have a lot risks to handle during the financing projects in international trade. This thesis tried to analyze the risks commercial banks may face in the financing of international trade during import and export activity, including customer credit, international financing market, financing fraud, legal system and internal risks of bank. It also provides effective methods to risk management from several point view, including financing environment, internal and external risk control, and innovation of financing measures. This will establish a solid foundation for the risk management of letter of credit in financing project.By reviewing a large number of domestic and international literatures, and comprehensively learning advanced theories and practical experience, this thesis analyzed the development process of the financing of international trade; described the history of the letter of credit and its theories; analyzed the relationship between letter of credit and financing of international trade. In addition, according to the questionnaire survey, this research revealed current situation of the financing of international trade in China. Based on the survey, the risk of letter of credit in financing of international trade faced by commercial bank was systematically analyzed and several risk control measures were proposed. In summary, the development of international financing is a continuous and innovative process. Native commercial banks should improve current transaction on the basis of a comprehensive risk manage system, promoting the development of international trade.The content of this thesis is as follows:First, the research background, the significance of the subject, the methodology, and the innovation points were introduced; secondly, the theories of letter of credit, financing of international trade and their relationship were reviewed; then, the application of letter of credit in the financing of international trade was investigated by survey, clarifying the practical situation in China; hereafter, combined with case studies, the risks of the use of letter of credit in the international trade were analyzed; and Finally, on the basis of risk analysis, relevant control measures were proposed.