As a conditional payment instrument used by banks, settlement method of L/C saves the importer and exporter out of credit crisis boosts mutual trust between and each other helps guarantee the seller’s acquirement of payment and the buyer’s getting the commodities. Accordingly, this kind of bank business develops very quickly. According the statistics from the international Chamber, more than 70% international trade is settled by L/C, which is far above remittance and collection. L/C has become the most widely used main payment means. With the progressing of economic integration and finance globalization, L/C has business gets fast development in our commercial banks as well owing to the upgrading of competition, many foreign banks take part in the competition of this field first. Especially, with the rapid growth of import and export business in our country, the letter of credit service settlement method has been more and more generally selected in the foreign trade, and the bank letter of credit service settlement business volume rises unceasingly, the operation risk event frequency sends which has brought the massive loss for the commercial banks. So, it is necessary to study how to avoid the huge risk which results from L/C operation.
Firstly this paper gives an overview of the definition of L/C and the process of current operating situation of L/C. Secondly, The article analyses Letter of Credit operational risk resulting from three sides: banks system、person factors and deceiving. Ultimately the paper provides the corresponding measures of keeping away the Letter of Credit operational risk.
【Key Words】Letter of Credit(L/C) Operation risk UCP600
