The Research Of Risk Control On Letter Of Credit In N Bank Suzhou Branch

The letter of credit is an international settlements tool which guarantees for bank credit. Especially in the foreign trade of developing countries, the letter of credit still accounts for a large proportion. Bank credit can be added to reduce the risk of long-distance between partners or not familiar with each other and conducive to fulfill trade contracts smoothly. But reducing risk dose not equal to eliminating risk, the credit is not a foolproof idealized tool. On the contrary, the bank provides credit guarantee for the parties to the transaction, meanwhile they also face many risks. The subject of this article is studied on N bank who represents commercial banks, through a lot of literature, empirical analysis by combination between theory and the classic cases, discuss the major risks faced by N bank in the credit settlements and its causes and different risk control measures, concludes with recommendations for commercial banks to control Letters of credit risks better and better.The thesis is divided into six parts. The first part of the preface introduces the background and significance of the research and the present researching situation of Letter of credit, as well as literatures from domestic and foreign scholars. The second part discusses the concept, features of Letter of credit and a simple analysis of the business processes under credit. The third part introduces the present situation of N bank’s credit settlement, and then combined with the characteristics of the credit system describing the reasons of present situation. The fourth part combines with relevant case studies to pay attention to the major risks of Letters of credit such as fraud, countries or areas risks, market risk, credit risk, document risk and operational risk which faced by N bank, one by one, and corresponding control measures. The fifth part against the advancement and the insufficient of N bank’s Experience puts forward some suggestions on the management and control measures of letter of credit risk in commercial banks. Part VI summarizes and raises again the bank’s risk management is not to eliminate risk, but try to avoid or reduce the loss caused by risks, have a full understanding of the risks and to manage and control risk measures better and better.