How Does The Bank Guard Against Under Letter Of Credit Financing To Give The Letter Risk

This paper specifically analyzes several current credit-letter financing tools of commercial banks, so that the relevant staff in banks can master the credit-letter financing business. In this way, every kind of financial risks arising in the financing process can be effectively guarded against and it can increase the loan interest income, as well as intermediate business income. Objectively speaking, it also can promote the growth of enterprises, as well as the country's foreign trade business. This paper analyzes potential credit risks in the business one by one through describing the export and import financing under credit letters, so that the bank credit departments could prevent the risks. Research methods, such as classified description, summarization, operational duties, case studies, and reference documents at home and abroad, are used in this paper.By studying the potential credit risk in the credit-letter financing of commercial banks, this paper concludes that if the bank want to obtain the stable interest income and other intermediary business income from this business, it must have a clear understanding on credit letters standards, and a more profound understanding of international trade practices; in particular, it should seriously address credit risk and moral hazard in the financing process, so as to effectively reduce the risk of credit letter financing, making it a low-risk business to achieve the original intention of the commercial banks.