International Relations Researches

International Relations Researches

Risk management of banks and financial institutions in payment based on letters of credit in foreign trade

Document Type : Original Article

Author
karimi Gholamreza
PhD in Private Law, Islamic Azad University, North Tehran Branch.
10.22034/irr.2022.356023.2244
Abstract
Letter of credit is considered as one of the most important payment methods in foreign trade, which has been the focus of foreign trade activists for its successful operation in managing transaction risks for decades. However, this method of payment regarding letters of credit and including banks could not cover all the risks associated with this method of payment, which if not paid attention to, the interests of banks may be significantly damaged or will be very difficult to access. In this regard, in this article, while paying attention to the many risks that banks face in the process of payment based on letters of credit in foreign trade, providing practical solutions on how to manage these risks has been considered. The material presented in this research shows that by taking appropriate measures, the possibility of letters of credit risks for banks can be significantly reduced and and in this reason, banks are advised to pay constant attention to the provided methods for the management of the risks in the payment process, in accordance with the letters of credit.
Keywords
International finance
foreign trade
letters of credit

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