Research On Financing Risk Control Of Export Credit Insurance

In 2014, Chongqing’s export totalled US$63.4 billion, up by 30% year on year, achieving significant growth despite economic slowdown under the "new normal". However, the export of goods from local companies remains a bumpy journey. Since 2014, due to the protracted sluggish global market, intensified currency fluctuations and ubiquitous trade barriers, the local companies have been seeing an increase of payment defaults by overseas buyers and slow progress in market expansion, which causes varying degrees of losses and drags them into a quagmire of overseas debt collection. Statistics show that the Chongqing Office of China Export and Credit Insurance Corporation(Sinosure) paid out US$22.96 million(RMB0.138 billion) for short-term credit insurance compensation, up by over 200% year on year. Meanwhile, the Chongqing branch of Bank D has seen 1.8% NPL ratio in their export credit insurance financing business, representing 215% year-on-year increase.To address this issue, this article analyses the causes of bad loans in export credit insurance financing( "ECIF") from different perspectives, including credit risk, operational risk, and legal risk, and offers effective and feasible countermeasures in different stages from pre-loan investigation to loan check-up.The first part of this article provides the background and purpose of the research, literature review, research methodology, and an introduction of main parts. The second part is an overview of financing services through export credit insurance, including the definition, purpose, and financing procedures. The third part gives a qualitative analysis of ECIF in terms of credit, operational, and legal risks. The fourth part investigates the management model of ECIF and its credit, operational, and legal risks in practice. The fifth part, based on the previous analysis, offers risk prevention methods and suggestions for different stages from pre-loan investigation to loan check-up.The main contribution of this article is the analysis of causes of bad loans in ECIF in theory and practice through the author’s years of banking experience. It believes that credit, operational and legal risks are the main risks in financing service; it also proposes the concept of whole-process risk management as a way to prevent risk, which provides a reference for banking professionals.