Study On Risk Management Of International Trade Financing Of Commercial Banks

Deep rooted in international trade activities,international trade financing is defined as circulation of cash and credit in international settlement.International trade finance products refer to integrated capital turnover services provided by commercial banks for import and export enterprises according to their international trade settlement.With the development of economic globalization and international trade,international trade financing has been increasing in demand.As a result,commercial banks in China have been motivated to develop their international trade finance business.Under the environment of more dynamics and complexity,the ability of commercial banks risk management of international trade financing can directly affect the banks management efficiency.Controlling the risks of international trade financing plays an important role in maintaining the stability of financing environment and the sound development of the country’s financial system.This paper takes the example of a joint-equity commercial bank in China.With rich experience in international trade financing and financial derivative instruments,the bank has developed its ability of risk detection and prevention.However,the commercial banks still put profit in the first place,which inevitably leads to the overlook of the risk in international trade financing.Besides,under the complex global environment,the risk management system of commercial banks is not advanced enough to deal with the emerging risk points.With a detailed survey of the international trade financing risk management system of the targeted bank,this paper studies the international trade financing products,potential risks and the current situation of the risk management system.Based on the data and theory,this paper discusses the country risk,exchange rate risk,interest risk,credit risk,fraud risk and operational risk of the targeted bank in its international trade financing businesses.Besides,the paper explores the reasons behind these risks,including the lack of risk awareness and risk management system,the asymmetry of information,the shortage of high-caliber professionals,and the outdated risk management technology.At last,the paper provides managerial implications to strengthen the ability of commercial banks risk management.Commercial banks should: First,improve its risk management system including overall process risk monitoring and internal control system;Second,establish a credit management pattern which is suitable for the development of international trade financing;Third,regulate the operational details of international trade financing;Fourth,build a talent pool;Fifth,cooperate with international banks.