The risk in international factoring mainly refers to credit risk, that is, the potential possibility that a bank, as a factor, its customers fail to perform or improperly perform the obligations stipulated in the contract terms. Once this possibility becomes a reality, it will bring direct economic losses to banks, and its essence is a default risk. The risks faced by banks are mainly divided into the following four categories: (1) importer credit risk. Once the importer is extremely bankrupt, the risk will be borne by the bank. (2) Credit risk of exporters. Due to the lack of supervision of banks, there is a risk that importers will pursue the payment and exporters will be unable to pay. (3) Credit risk of corresponding factors. Mainly refers to double factoring, which refers to the possibility that when two factors provide services at the same time, one factor is unwilling to perform its obligations, which may harm the interests of the other party. (4) National credit risk. Changes in the political economy, legal system and social stability of the importing country directly affect the international trade situation of the country, or indirectly affect the solvency of importers, thus making banks face certain national risks.
1. 1 importer credit risk
According to the principle that risks are transferred with ownership, banks buy out exporters' accounts receivable and become creditors of accounts receivable. At the same time, it also bears the risk that the accounts receivable originally borne by exporters are difficult to recover. The importer risks faced by banks mainly include: ① the buyer is unable to repay the debt or goes bankrupt; (2) The buyer defaults in payment; (3) The buyer refuses to accept the goods and refuses to pay. For the first two cases, the reasons for exposing these risks are: on the one hand, the bank's financing judgment is wrong. Financing review lacks objectivity and comprehensiveness, overestimates the importer's credit status and misjudges the importer's performance ability. In addition, the importer's credit level was good at first, but during the performance of the contract, due to various reasons, its credit level declined, and it was impossible to continue to perform the contract, and the bank lacked sufficient supervision; On the other hand, importers conceal their credit information from banks, falsify financial data reflecting their repayment ability, and fail to inform them of various major events that may affect their timely repayment.
In single factoring, because there is only one factor, the credit risk of the exporter is borne by this factor; In double factoring, the export factor bears the importer's risk directly relative to the exporter, while the import factor bears the importer's risk directly relative to the export factor, so this risk is ultimately borne by the import factor. However, it is conditional and limited for banks to bear the credit risk of importers: (1) It is necessary for import factors to receive copies of invoices and other necessary documents before the due date. (2) The bank's commitment to the importer's credit risk is limited to the approved credit limit, and the risk of accounts receivable exceeding the credit limit shall be borne by the exporter. (3) The exporter must fully perform the contract for the sale of goods according to the contract, and within these conditions and scope, the bank will bear the bad debt guarantee of 100%.
1.2 export credit risk
In practice, banks generally pay more attention to the credit status of importers, because importers are the ultimate payers of accounts receivable. But the credit of exporters is also an extremely important aspect, because the credit risk of exporters may also bring huge losses to banks. The credit risk of exporters is mainly manifested in the following aspects:
(1) Due to the fault of the exporter, the importer refused to receive the goods, refused to pay, and even filed a claim, while the supplier closed down or lost its solvency for other reasons; (2) The goods or debtors indicated on the invoice simply do not exist due to the negligence or intentional * * of the exporter, and even the exporter colludes with the importer. This shows that the relevant accounts receivable are flawed, and the bank has no obligation to pay further, but the bank will face the risk of losing the advance payment. If the exporter's credit is good, the bank can recover the advance payment. On the contrary, if the exporter goes bankrupt or absconds after defrauding the advance payment, the bank will bear the losses.
In double factoring, because the advance payment is provided by the export factor, the export factor rather than the import factor bears this risk. On the one hand, the import factor pays the advance payment to the export factor, which has no direct legal relationship with the exporter; On the other hand, the export factor is responsible for guaranteeing the defects of accounts receivable transferred to the import factor. If there are defects, the export factor is obliged to buy back the defective accounts receivable. This is because whether the exporter's accounts receivable are classified as factoring or whether to provide advance payment is based on the export factor's credit evaluation of the exporter, so the export factor should bear the adverse consequences caused by wrong evaluation or deterioration of evaluation.
Credit risk of corresponding factor 1.3
It mainly refers to the possibility that in double factoring, one party's factor fails to perform its obligations, which will bring damage to the other party's interests. For the export factor, the main risk from the import factor is that the import factor does not abide by the mutual factoring agreement, and after collecting the accounts receivable from the importer, it escapes or refuses to transfer the corresponding amount to the export factor. For the import factor, the risk of the export factor is relatively small, mainly because the export factor cannot receive the accounts receivable due to its own reasons and cannot obtain the risk of paying the factoring fee. In general, the export factor can deduct the insurance premium from the collection.
1.4 national credit risk
In international factoring transactions, changes in the importer's national politics, laws and economic policies may bring losses to banks. The direct consequence of national credit risk to international factoring business is to delay payment, suspend payment or confiscate payment. Because the national credit risk is generally unpredictable, once it appears, it will often cause huge losses to importers and exporters and bank factors. There are many factors that affect the national credit risk, including politics, economy, law and war.
2. Risk prevention in international factoring business
Since the rights and obligations of the parties to international factoring involve at least the laws of two or more countries, it is bound to involve the application of transnational laws. Although the Convention on International Factoring and the Rules of Practice for International Factoring have been adjusted in the international scope, due to their limitations and great differences in the legal provisions of international factoring, China has not yet formed a complete legal system for international factoring, which makes the litigation period long and complicated when international factoring disputes occur. Therefore, in order to fully guard against the credit risk in international factoring business, commercial banks should not only resort to litigation afterwards, but also establish a strict and efficient prevention mechanism beforehand.
2. 1 Establish a credit risk prevention mechanism for importers.
(1) Conduct a thorough investigation and study on the credit status of importers, such as credit standing, financial strength and repayment ability, so as to establish credit sales quotas for exporters for different customers (importers). Accounts receivable within the credit line are classified as approved accounts receivable, and the bank factor provides them with non-recourse financing and bad debt guarantee. Accounts receivable beyond the credit line are unapproved accounts receivable, and the bank factor only provides them with recourse trade financing and does not bear the risk of bad debts. In order to protect their own rights and interests, banks can make corresponding adjustments or cancel the credit line according to the credit changes of importers. However, this point should be clearly stipulated in the factoring agreement, otherwise, adjusting or canceling the credit line at will will harm the interests of exporters, not only lead to the liability for breach of contract, but also damage their own reputation.
(2) When accepting accounts receivable, avoid accepting accounts receivable that the debtor is too concentrated. For this kind of accounts receivable, once the debtor goes bankrupt and loses solvency, the bank will suffer greater losses, which should be avoided as far as possible. Even if it is accepted, it should be reduced by centralized limit.
(3) Banks should try to adopt double factoring in international factoring business. Through an import factor in the importer's country, they can understand the importer more comprehensively and collect money more conveniently.
2.2 The establishment of exporters' credit risk prevention mechanism.
In order to prevent the credit risk of exporters, the first thing banks should do is to make a detailed and thorough evaluation and investigation of exporters and their accounts receivable. Generally speaking, the factoring exporters selected by banks should have standardized operation and management, sound financial system, good credit record and strong solvency, and most of them are existing key customers of banks. Exporters' products should usually be high-tech and high value-added products or high-end public facilities with broad market prospects. Then, on this basis, to strengthen the guarantee mechanism of exporters, banks should require exporters to make the following commitments and guarantees for their creditor's rights in the export factoring agreement:
(1) Guarantee the legality of creditor's rights. Exporters should ensure that the creditor's rights of the accounts receivable they sell come from legal transactions, rather than accounts receivable arising from the unauthorized operation of products; The exporter has fully fulfilled the responsibilities and obligations under the contract; There is no dispute that the products provided by exporters have been or will be accepted by importers. (2) Guarantee the integrity of creditor's rights. The exporter shall ensure that the bank bill discounter enjoys the same rights as the exporter in respect of accounts receivable, including the right to charge the debtor interest and other related fees. (3) Guarantee the transferability of creditor's rights. The exporter shall ensure that there are no obstacles to the transferability of creditor's rights at the beginning and during the factoring agreement, except for the factors disclosed to the bank. (4) Guarantee the exclusiveness of the transfer of creditor's rights. The exporter shall ensure that the accounts receivable shall not be mortgaged to a third party in any way without the written consent of the bank factor. If there is a mortgage on accounts receivable before the signing of the agreement, the exporter must cancel the mortgage upon the request of the bank factor. After signing the international factoring agreement, the exporter shall not sign a similar mortgage agreement with any third party.
2.3 Establish the corresponding factoring credit risk prevention mechanism.
Both export factor and import factor should carefully choose the corresponding factor. Before doing factoring business, you need to conduct corresponding credit investigation and evaluation on the other party. You should choose a bank or factoring company with good credit status and strong anti-risk ability. If you are a member of the International Factoring Association, you can consider choosing a member belonging to the same organization. Generally speaking, most factoring companies choose their business partners who have signed international factoring agreements to carry out a specific international factoring business.
2.4 Establish a national risk prevention mechanism
Factors generally avoid doing factoring business in countries with turbulent political, economic and legal environment. As far as exchange rate risk is concerned, as the factor often involves multinational debtors in its business, and there are many currencies for payment and acceptance, the risk can be eliminated to some extent, and if necessary, the exchange rate risk can be eliminated by purchasing forward foreign exchange settlement and sale contracts in relevant currencies. Due to the short term of international factoring financing, the exchange rate risk is not too great. The most fundamental precaution is to choose a country with a stable investment environment.
2.5 Strengthen cooperation with insurance companies.
In order to reduce the operational risks of commercial banks, we can learn from the practices of European and American factoring companies, strengthen the cooperation between commercial banks and insurance companies, try to carry out factoring insurance, and actively and effectively spread risks on the basis of standardized operation. Once the importer goes bankrupt or is unable to pay, part of the losses of commercial banks can be passed on to insurance companies. For example, the factoring company of National Bank of America will use two-thirds of the factoring commission for insurance. Banks and insurance companies in China can attract a huge customer base through their branches all over the country, enjoy information resources, penetrate each other, cooperate and develop, and further expand the international factoring market in China.
References:
Li Jinze. Banking Factors: Legal Risks and Precautions [J]. Financial Times, 2002, (7).
[2] You Feiyu. Risks and Precautions of Banks in Export Factoring [J]. International Economic and Trade Exploration, 2003, (6).