Can anyone define 'first-class bank' please? The contract requires LC to be issued through a 'first-class bank acceptable to SELLER', but what is a first-class bank?
Thanks all for your comments, all noted. I think the comment by Abrar of defining a first-class bank as specifically one with a minimum short-term credit rating of say F1 (Fitch), P-1 (Moodys) is a very good one and leaves it tight as to what banks are acceptable. Also, provided the words 'acceptable to SELLER' are included in the contract wording, then it provides extra cover.
Top 10 banks in my country are not ranked in Top 500 banks in the world. However, as far as I know, complying documents presented under LCs issued by these banks have been paid OK so far. I think the terms “first-class bank” have a relative meaning. It could be any international reputable bank or local reputable bank that is ACCEPTABLE to the seller.
Regards/Nguyen Huu Duc
"First class" or "prime" is a subjective concept, but I should think that for the purpose of issuing LCS or guarantees, a bank with a minimum short-term credit rating of say, F1 (FitchRating) , P1 (Moodys) or equivalent, would be acceptable as a "first class" bank. As stated below, the Bankers Almanac would be an appropriate source to obtain such details.
First class bank, IMHO, means a very important bank. From L/C point of view all banks are first clas bank, but i remember a japanese seller that considred first class only the banks that were in the first 500 world rank bank, accepting an l/C directly and requiring confirmation on the l/c issued by banks under this limit. World rank is provided by special institutions; Bankers Almanac, etc.
Other Comments appreciated
Article 3 of the UCP 600:
"Terms such as 'first class' [...] used to describe the issuer of a document allow any issuer except the beneficiary to issue that document."
If we assume that "document" includes an LC and "issuer" is to include "Issuing Bank" as well, then it would seem pretty much any bank could be a first class bank, at least under UCP 600 rules.