Letter of Credit Forum

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Hi All,

If any bank other than the advising bank takes up the role of
Confirmation, does that necessarly become silent confirmation or is
there a process to inform the issuing bank about it and make it a normal
confirmation.

government banks.

regards,

phe9oxis,

http://www.guidebuddha.com

Thanks all for the clarification.

Hi,

  As you know there are to kind of confirmation in LC operation, open confirmation and silent confirmation.

Open confirmation could be done by an advising bank of the relevant L/C or by another bank which is not an advising bank, both of them at request of or under authorization of an Issuing bank. so confirming an L/C by a bank which is not acting as  advising bank does not mean silent confirmation.

regards

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To add to the below comment, whilst not provided for under UCP, if a bank wishes to "silently" confirm the LC, that is to say, without being nominated under the LC, and without being authorised by the issuing bank to confirm the LC, it must understand that they would not be offered any protection, or any recourse to the issuing bank under the LC, as would be afforded to a nominated confirming bank. The "silent" confirmation would remain a private arrangement between the bank and the beneficiary.

If the bank wishes to protect its right of recourse to the issuing bank, and be protected under the the UCP provisions, it would be well advised to follow the usual protocol, and request nomination as a confirming bank, by way of an amendment, through the usual channels.  

Dear Satish,

There is no such thing as 'silent confirmation' in the UCP. All confirmations are in accordance with Article 8 of UCP 600. If a bank is requested to add its confirmation, but does not wish to (whatever the reason), sub-article 8(d) comes into play.

A "silent confirmation" is actually a misnomer, coined to confuse the issue. All confirmation are under Article 8 of UCP 600, or it is no confirmation. If a bank wants to lend to its customer - whether by advancing funds against bills drawn under another bank's LC, or against collection bills, or through any other mechanism, it is a decision purely between the lending bank and the borrower. It happens all the time. Why should one call it 'silent confirmation', beats me!

The matter of recourse - with or without - is again shadow boxing, in my opinion. No bank ever advances funds to a borrower "without recourse". It will make sure that it binds the borrower, and puts in place ways and means (through documentation, creation of security etc.) to ensure that the borrower is obliged to repay if called upon to do so, irrespective of the mode of financing.