The Research Of L/C Financing Risks In Commercial Banks And The Preventive Suggestion

In recent years,with the rapid development of world’s economy and economic globalization,our country’s international trade has developed quickly,meanwhile,it also needs to face more challenge.As we can see from the China’s total trade volume date of 2015,published on January 19,2016 by our country’s Statistical Department,the past year underwent a slight drop by 7.0% in the figure of 24584.9 billion.In the category of total export,the number is 14135.7 billion dropped by 1.8%.The number of total import in 2015 is 10449.2 billion, which is declined by 13.2%.Fortunately, favorable balance of 3686.5 billion is ensured.Under this background,import-export corporations’ financing problem becomes more important.There are many international trade methods,corporations must focus not only on the market risk,but also on the operational risk,credit risk and so on,as the exporters and importers may not even know each other in depth.In consequence,Letter of Credit,which is productive and less risky,is being paid more attention.The L/C method solves the problem of payment in advance and delayed payment.Combining settlement and financing,L/C financing is one low-cost and high-yield intermediate business in commercial banks,it directly promotes the asset and liability operations of commercial banks.At the same time,L/C financing also brings risk to banks because of its special characteristics.It goes without saying that the study of the risks of L/C financing for our country’s commercial banks is significant.In this article,we analyze the different ways of trade financing under Letter of Credit one by one in utilizing L/C financing theory,according to our country’s present situation and problems of L/C financing.There is no doubt that all kinds of risks of L/C financing the commercial banks faced is the key point in this study.It also emphasizes on analyzing the special risks of L/C financing.A serious of relevant suggestions about how to prevent the risks were presented in the end.