Study On The Risk Management Of Trade Finance Of Commercial Bank In China

Along with the course of global economic integration, the international trade has become more and more important in national economy. And international trade financing has witnessed a rapid progress as a newly emerging financial operation. However, the risk which derived from international trade finance restricts heavily the rapid development of commercial bank's international services. It is undoubtedly that every means of financing will be confronted with all kinds of risks, but these risks can be controlled and avoided by appropriate management measures. The author analyzes the risk management of domestic commercial banks in handling international trade financing business in order to intensify reader's understanding to the international trade financing business and its risks, and form a framework of risk management for bank's international trade financing business. The thesis consists of 6 parts.In the first part, the author describes the financing in international trade and the risks during the trade. The paper probes into international trade finance and risks by applying standardized analytical method. It attaches importance on integrating theory with practice. It also lay stress on comparative analysis to summarize the condition and trend of international trade finance development by vertical and horizontal comparison.In the second part, the author describes the international trade and its risks, First of all, this article introduced international trade finance of which mainly concerned the definition, development, function and character and its important role in commercial banking. Besides, It reviewed methods for risk management commonly used in International Commercial Banks.In the third part, the author analyzes the current situation of international trade finance in commercial bank in China. International trade finance has a long history abroad, but it is not very long for commercial bank in China to develop international trade finance, which is restricted by environment around and economic system. So commercial bank in China showed a lot of flaws in trade finance and its risk management. Generally speaking, there is certain gap in practice between commercial banks in China and international commercial banks. This is due to the internal operation of domestic commercial banks in a long-term mechanism is formed under the framework of a planned economy. Therefore, in operation, whether in business practices and internal mechanisms, It is still unable to fully meet the current external environment of market economy. On the bank's trade financing business practices, its standardization still needs improvement, and innovation of trade finance products yet to be raised, particularly the risk prevention system is not perfect enough.In the fourth part, the author analyzes the risks of trade finance. Risks of trade finance shows Characteristics such as international, diversity and technical, and it is should not be overlooked as a risk control in commercial banks . Apparently, It is the basic premise of risk management that analyzing risks of trade finance accurately and mastering how to prevent and resolve. It also discussed the difference of risks among different products of international trade finance on the basis of analyzing various trade financing products and their risks.In the fifth Part, the author discusses the basis of risk management in trade finance. It primarily includes two aspects: first, to establish the risk rating system. Second, the application of RAROC model in trade financing operations of commercial banks. Risk management starts from risk identification, and customer credit rating system is an important part of risk identification. Considering the characteristics of trade financing business, the author also discusses credit rating of trade partners and foreign countries. Currently, a number of major international risk assessment methods own priorities, the author strive to Search for the simple model of RAROC, which is suitable for the current situation of risk management in domestic commercial banks.In the sixth part, aiming at the problems existed in the domestic bank's trade financing business and its risk management, the article tried to seek ways to measure prevent and control its risks, which helped eventually establish the risk control mechanisms in international trade finance.