The role of the Confirming Bank under the UCP 600
Joint and Several LiabilityThe confirmation of a letter of credit creates a "definite undertaking of the confirming bank in addition to that of the issuing bank" (see Article 2 definition of "Confirmation"). The definition creates the illusion that the obligations of issuing and confirming bank are identical. The obligations of issuing and confirming bank differ however since these obligations are based on different legal systems, since each bank is subject to the law of its place of business.
This follows from international private law which is the national body of law that determines which law the courts will apply when different legal systems are touched by a transaction. International private law is national law and each government is free to come up with its own rules. However, most countries agree that the obligation of a domestic bank are to be judged according to local law.
The obligation of the issuing bank as provided for in Article 8 a UCP 600 is identical with Article 9 b (i) - (iv) UCP 500. Article 8 a (similar to the definition of the obligations of the issuing bank under the UCP 600) takes in to consideration the new nomenclature according to which the obligation to satisfy a letter of credit consists of its "honour".
Comments
Issuing and Confirming bank obligations
Under UCP600, the obligations of these two entities also differs as follows:
1. The issuing bank undertakes to honour a complying presentation
2. A confirming bank undertakes to honour a complying presentation and provide settlement in the event that the issuing bank does not.
By the way Admin - I have a word document that is used as a teaching guide for trade finance at this bank that I wrote a couple of years ago that I would be happy to let you have to review and make available to members of this site if you feel it adds value. Just let me know how to get this to you.
regards
Peter M
Teaching guide
Thank you for the offer for a teaching guide Peter M.
My various duties include all international operations, BSA, AML, and teaching to "all" about those subjects. Will you please send me your guide to ameizoso@oceanbank.com ? Thank you
Mr. Alexis M. Meizoso, Miami, FL USA
Issuing and confirming banks' obligations
Dear Peter,
You wrote:
2. A confirming bank undertakes to honour a complying presentation and provide settlement in the event that the issuing bank does not.
There is one more difference with the issuing bank. It is regarding availability. A credit is always available with the issuing bank. However, for a credit to be available with the confirming bank, it would have to be a nominated bank.
Have a great day!
Teaching Docs
Hi Peter,
Please send me the docs at mic60@rediffmail.com .
Many Thanks in advance
Mic
Teaching Doc
Hi Peter
I would be grateful to you if you can mail me the doc to my mail id: shankargd@gmail.com
Regards
Shankar
Copy of teaching document
Hi Peter,
I know you wrote the related post a few months ago but i am new to trade finance and working in a bank where the training has not been great. I would be ver grateful to recieve a copy of this training document if at all possible. My email address is chrissurgett@hotmail.co.uk.
Very best regards
Teaching guise
Hello Surge - you can access the teaching guide through the "articles" tab at the top of this page and print direct from the site.
UCP 600 article 8
Hi Peter,
I have an issue with LC negotiation.
Bank A in Jordan had issued an LC to Bank B in UAE to be negotiated at Bank B only.
We (Bank C) got the LC assigned by Bank B and discounted the bills under the LC. However the confirmation from Bank B read as - "we will honour the bills subject to reciept of payment from Bank A"
Are we safe in this transaction. Is the confirmation irrevocable?
Also do you have a simplified/explained version of UCP 600.
L/C negotiation vs Confirmation
Hello Ameeta - you have not mentioned that bank B in the UAE have actually confirmed the L/C, only that it is restricted to them for negotiation. If they are saying that they will pay only after receipt of funds from the issuing bank, then it sounds very much as if they have NOT confirmed the L/C, nor are they prepared to take up the negotiation and pay prior to reimbursement.
As far as your risk is concerned, you are taking the risk of the issuing bank in Jordan not the bank in the UAE. I am assuming that by "assignment" you are referring to an assignment of proceeds from the beneficiary with instructions to Bank B that funds are to be remitted to yourselves (bank C).
Regarding UCP600, the international team that put these rules together try very hard to make them as simple as possible - I don't know if there is an authoratative "simpler" version that can be relied upon. The ICC have published a number of explanatory books on this subject.
Dear Peter,
i will appreciate if u can send me a copy of this document at olusanyaoni@yahoo.com.
Thanks a lot.
Olusanya Oni
Lagos, Nigeria.
issuing and confirming bank obligations
Kindly give me a copy at my e-mail address in sumarun@gmail.com. I would be very grateful.
regards
buran
Dear Peter, I woud
Dear Peter,
I woud appreciate if you can send me copy to my e-mail address (ahmedmasry@gmail.com)
Thanks so much in advance,
Ahmed
Peter's Guide
I will be extremely thankful if u plz email a copy of ur guide at kamran.ameer@askaribank.com.pk
kamran Ameer
Management Trainee Officer
Askari Bank Limted, Pakistan
Mob: +923008668984
PETER M TEACHING GUIDE COMING SOON
Peter, is it possible for you to send it to me as well ....
Email : lcspecialist@yahoo.com
Looking ahead to hear from you ... and waiting for your teaching guide ....
Thanks!!!!!
PETER M TEACHING GUIDE COMING SOON
Peter,
I am very excited about your offer and will announce it on the front page.
Admin
PETER M TEACHING GUIDE COMING SOON
Peter. I would appreciate you if you could send it to me on mujeeb.mohammedshaik@gmail.com
Thanks in advance
Regards!!!!
Mujeeb :-)
copy
pls send me a copy to johnsanthakumar@gmail.com
copy
Please any one can send me a copy to maghrebtrade@yahoo.fr