Research On The Risk Management Of Bulk Commodity Trade Financing In Commercial Banks

2015 is a complicated year for commercial banks. The superposition of multiple factors, such as economic slowdown, industrial restructuring, deposit interest rate ceiling, deposit ratio supervision canceling and so on lead to the slowdown of the profit growth of commercial banks and make downward pressure on asset quality. In 2016, even for a longer period of time, commercial banks will still face a greater operating pressure. Under the wave of global economic and financial integration, rapid development of commodity trade gives birth to the demand for commodity financing and financial services that bring business opportunities for China's commercial banks to expand related business. Commodity financing products have been developed from a single import letter of credit to cover the whole process of financing and supporting financial services. Compared to other credit businesses, commodity financing business has obvious advantages in reducing economic capital occupied, improving the liquidity of assets and intermediate business income. In particular, its characteristics of large amount, rapid turnover and high income are favored by commercial banks. Commodity financing business has become the core business for commercial banks.According to the forecast from Supply-Chain-Financial Organization named Demica, prior to 2020. the annual growth rate of Supply-Chain-Financial business will not be less than 10%. Supply-chain-finance is a new type model of financial service under the background of industrial division adjustment, which represents the future direction of trade finance. Via product integration and business innovation, commercial banks meet the demands of enterprise's entire Supply-Chain-Financial services, which is an important point to build the core competitiveness. In recent years, with the deepening of the global economy combination and the expansion of the commodity trading scale, commodity finance which services the enterprise global commodity resources allocation and trade circulation, has gradually become the focus of domestic commercial banks.Against this backdrop, the actions of domestic commercial banks to effectively promote the combination of commodity financing and supply chain finance, and make commodity financing risk management, has important practical significance.During the period of writing this paper, the phenomenon of economic slowdown, small and medium-sized enterprise bankruptcy, folk illegal financing, and refusal to repay the loan from Financing Guarantee Corporation exist commonly. Banks in Chengdu area are impacted by acceleration of Non-Performing Loans (NPL); NPL ratio is much higher than the upper limit of the banks.Until the end of the third quarter of 2015, commercial bank NPL balance of 11860 Yuan has rebounded for 16 consecutive quarters, and bad loan ratio 1.59% has rebounded for 9 consecutive quarters. In 2016, de-capacity and disposal of non-performing enterprises may accelerate the outbreak of bad loans to commercial banks.In the aspect of commodity finance, trade finance could mutate into an important tool of market arbitrage when a country's interest rate and exchange rate cause arbitrage space. With the weak domestic demand of commodities, and steel overcapacity, income obtained by trading spread has shrunk; falling prices increases the risk of trade finance. On the other hand, the frequent outbreak of trade finance as a result of the domestic economic slowdown, continues depreciation of the RMB exchange rate, along with the control of shadow banking credit risk exposure by regulators. Enterprises in Qingdao Port repeat the pledge of warehouse receipts to defraud loans with bank credit officers, causing hundreds of millions of dollars in risk exposure. The investigation by authorities is deepening the market concerns about China's credit risk.Commodity financing customers hosted by me has been appeared default risk to a certain extent. Then, based on my work experience in CMB. combined with Supply Chain Finance innovation leaded by commercial banks, and commodities related to the development of livelihood and economic, the author analyzes the real risk and proposes the risk management.The main research method in this paper is case analysis, which is divided into five parts. First part is introduction, to present overall architecture:the background, significance, research methods and innovation and the insufficiency;The second part is the related literature review, to summarize two aspects: review of foreign and domestic research; display the development of commodity finance from the foreign bank side.The third part is basic concept of commodity financing, development and risk management, and connecting with the Basel III, the CMB conception of risk management of Supply-Chain-Finance is put forward.The last part is the real case analysis in my career, selecting commodities such as copper to study risk management of commodities trade and proposing risk management suggestions and advice.Conclusion and countermeasures are at the end. According to recent development of commodity finance business of CMB, the author attempts to put forward practical risk management recommendations and countermeasures.