The Evaluation And Research Of Importer's Credit Risk In International Business Of Commercial Bank In China

With the deepening of China's opening-up to the outside world and the increasing of China's foreign trade volume, the international settlement business, as one of the important business of commercial banks, is playing a pivotal role in China. Of the three settlement methods of international trade, the letter of credit has the incomparable superiority over remittance and collection for the replacement of commercial credit with bank credit and thus occupies the important position in the international settlement business. However, the characteristics of the international settlement, such as the interningity, financing, specialty and complexity, determine the high risk of the international settlement business, involving the national risk, policy and legal risk, market risk, foreign exchange risk, credit risk, operational risk, settlement risk, fraud risk, etc.The letter of credit is a payment guarantee backed by the credit of the issuing bank. That is, since the establishment of a letter of credit, the issuing bank is irrevocably bound to honour the payment commitment. When the importer is unwilling or unable to fulfill its payment obligation for various reasons, the issuing bank must bear the responsibility for payment as long as the exporter provides the complying presentation. Therefore, the importer's credit risk is the high risk faced by the issuing bank.In this paper, the import bill advance issued by the S branch of China Construction Bank to X Group are taken for example; the expert consultation method and analytic hierarchy process (AHP) are adopted to work out the indexes related to the fuzzy evaluation; the credit risk model is used to evaluate the importer's credit risk faced by the issuing bank in the international settlement business of China's commercial banks. X Group is a large enterprise group in development. For the business development, it signed a contract with ABC CO. on 1500 tons of POLYMER GRADE PROPYLENE valued at USD 1.3 million. The document against acceptance is noted with the price of USD 1.29 million, honoured on March 2016 29. As X Group had difficulty in cash flow, it applied to the S branch of China Construction Bank for the import bill advance. In this business, the bank faces certain credit risks. The sources of these credit risks are multifaceted, including the market risk, policy risk, financial risk, transaction risk and enterprise default risk. With the expert consultation, AHP and fuzzy mathematics methods, the primary indexes and the overall value of the credit risk involved in the import bill advance from the S branch of China Construction Bank to X Group are worked out as follows: In the principle of the maximum membership degree of a risk project, the membership degree of the market risk to the credit risk is 0.45, the biggest, at a moderate level; the membership degree of the policy risk is 0.3809, at a low level; the membership degree of the financial risk is 0.4043, at a moderate level; the membership degree of transaction risk is 0.3403, at a low level; and the membership degree of the enterprise default risk is 0.61, at a high level. By aggregation of the risk weight data of all primary indexes of the credit risk, the membership degree of the credit risk involved in the import bill advance from the S branch of China Construction Bank to X Group is worked out at 0.4019, within the range of (0.4-0.6), that is, the credit risk of the import bill advance from the S branch of China Construction Bank to X Group is at an intermediate level.The bank should adopt various measures from multiple dimensions to strengthen the credit risk management and prevent the emergence of credit risk:First, the bank should seriously implement the "three practicing principles" to prevent the financial risk; second, the bank should attach great importance to the market environment to prevent the market risk; third, the bank should pay close attention to the enterprise defaults to prevent the default risk; fourth, the bank must strictly verify the authenticity of the transactions to prevent the transaction risk; fifth, the bank must effectively improve the internal control system to prevent the operational risk.