Research On Risk Management Of "Domestic Guarantees For Foreign Loans"

In order to coordinate with the “going out” development strategy and enhance the international status of RMB,the Chinese government decided in 2009 to carry out cross-border trade by using RMB as instrument in five southeastern coastal cities such as Shanghai.In 2010,the State Administration of Foreign Exchange issued the “About Domestic and Foreign Institutions Notice of the issue of external guarantee management([2010] No.39).The “domestic guarantees for foreign loans” uses RMB as a tool for trade settlement and becomes a new method of cross-border settlement.The State Administration of Foreign Exchange issued the “Cross-Border Guarantee Foreign Exchange Management Regulations([2014] No.29)” that emerged in the context of the “One Belt and One Road” initiative in 2014.This policy relaxed the requirements for the business,from the four aspects of guarantee principal,guarantee quota,approval mode and compliance management.In 2017,the No.108 document issued by the State Administration of Foreign Exchange allowed companies to transfer the funds belonging to the “domestic guarantees for foreign loans” to our country for use.This policy has promoted the rapid growth of the size and number of “domestic guarantees for foreign loans”.The dissertation has studied the existing theoretical and academic research at home and abroad and summarized the evolution of policy in China and the development status of the “domestic guarantees for foreign loans”.Based on the business of LeEco and China Merchants Bank as examples,this paper has analyzed the reasons for the problems and risks in the process of conducting “domestic guarantees for foreign loans”.There are many risks,including the exchange risk,operational risk,credit risk,policy risk,market risk and tax risk.At the same time,it analyzes the risk of the “domestic guarantees for foreign loans” based on the theoretical framework of COSO-ERM.The reasons for the risk of the “domestic guarantees for foreign loans” are the internal control loopholes in the bank,low awareness of risk control in the banking business,imperfect risk control system,lack of professional personnel,poor communication of information,and imperfect policy system.The paper believes that the following points should be used to reduce the risk of the “domestic guarantees for foreign loans”: First,banks should strengthen internal control.Second,banks should develop a complete risk control system.Then we should cultivate specialized personnel.The next is that companies and banks should exchange information obtained by domestic and foreign institutions.Last but not least,our government has completed their regulatory policies.