Research On Risk Management Of International Trade Finance Of Commercial Banks

With the acceleration of the process of the global economic integration and the deepening of China’s opening to the outside world,the scale of China’s foreign economic trade is expanding and the capital needs of China’s foreign trade enterprises are on the rise.The development of international trade finance business of commercial banks plays an important role in solving the short-term capital turnover problem of foreign trade enterprises and in promoting the overall development of foreign trade.But at the same time,commercial banks are faced with certain risks in the process of international trade finance.On the one hand,these risks are influenced by the external factors,including market environment,the region and the credit status,financial situation and management ability of enterprises etc..These factors are likely to cause defaults of the enterprises which may bring losses to commercial banks;On the other hand,these risks come from the banks themselves,including the uneven quality of employees,the imperfect internal control rules and regulations and the unclear operation procedures,these factors could enlarge the risk of losses which banks should avoid.The article first introduces the related concepts of international trade finance and risk as well as the related theories of international trade finance businesses,and then introduces the current development status of international trade finance businesses of commercial banks in Chongqing,and then analyzes the risks which may be faced in the processes of related businesses,such as credit risk,transaction risk,operational risk and other four risks.Secondly,through the combination of practice,the article finds that there are many problems existing in the processes of risk management of international trade finance in commercial banks in Chongqing,including the need to perfect the risk management system,the lack of awareness of risk of employees and the lack of risk management tools etc.In view of the above problems,the article proposes that new risk management measures should be found to adapt to the current development of international trade finance businesses in Chongqing.Thirdly,the article introduces and analyzes the case of providing import bill business to group X by bank of China,Chongqing branch,and then summarizes the risk factors exposed in the case,and then establishes a multi-level risk assessment based on the corresponding risk factors.Through a variety of empirical analysis methods,the article obtains the weights and risk level of each risk factor for the total case,and then obtains the overall risk level of the case through mathematical calculation.The article believes that on the one hand,problems of operating liquidity,pressures of short-term repayment,significant repayment risk and frequent occurrence of defaults in financial institutions are existed in the company;on the other hand,the company has deteriorating financial position,declined profitability,high contingent liabilities and certain financial risks;on the other hand,in the current international economic environment,the price of international trade commodities and the exchange rate of currencies are greatly affected by the changes of the world economy,politics and the military etc.,with some volatility and unclear tendency.The above reasons may cause the company to have a credit default.The empirical analysis shows that the bank of China,Chongqing branch has a moderate level of risk in the import bill business of group X.Meanwhile,the bank of China,Chongqing branch should focus on the credit risk and transaction risk of the business.Finally,combining with the risk factors in the above risk assessment,the article puts forward the corresponding risk management measures that commercial banks in Chongqing should take in the process of international trade finance businesses.These measures include carefully selecting customers,verifying trade background and financing needs,market dynamics and fully understanding of the financial data etc.,which are in order to prevent the associated risks.These measures have a certain degree of universal applicability.