Research On Long-term Credit Risk Prevention

Usancel letter of credit is a major way of international settlement, it is widely used in international trade for its characteristics of financing facility.In 2010, China's goods total import and export trade has reached 2.97 trillion dollars, increasing 34.7% over 2009, ranking first in the world scale. China has become a big trade country in the world. Usancel L/C has developed with the rapid economic development of business. It has facilities but accompany a number of risks. Criminals fraud take advantage of usancel L/C, such as financing through usancel L/C with false trade contract. Because usancel L/C has always used usancel bill as the background, and the legal relationship has interweaved, which makes the characteristic of risk of more complex. In practice, banks are the main victims of usancel L/C, and the loss of banks is always large, forming the non-performing assets. For example, the case of the famous Qizhong Mu, a branch of Bank of China in Hubei, has lost nearly 6 billion yuan. In order to standardize development of L/C, our country has promulgated the "Payment Measures of domestic letter of credit", and it has become a milestone in the development of L/C. Since then, the rate of credit fraud has decreased. Meanwhile, we also need to understand the fundamental causes of risk for preventing and further improve the mechanism of supervision and management of the banks, so we should clearly define the legal questions, such as the legal relationship. Based on analyzing the profile of usancel L/C, and its uses and effectiveness of its parties, the paper will discuss the risk of usancel L/C and propose some suggestions of defect in supervision and management of the bank. Combined development situation of usancel L/C to decrease economical risk, the suggestion will avoid the risk of usanel L/C and maintain our country's benefit.