Deal
Practitioner · Case Study
Confirmed LC and Issuing-Bank Risk
An exporter accepts a buyer’s LC but does not want to keep the issuing-bank/country risk.
Concern
Exporter’s bank considers the issuing bank/country acceptable only with confirmation.
Action
Confirmation is quoted and added before shipment, subject to agreed conditions.
Presentation
Exporter ships and presents complying documents to the confirming bank.
Finance
Confirming bank may discount its own deferred-payment obligation depending on the structure.
Lesson
Confirmation changes who owes the beneficiary; it is not merely an authentication stamp.
Work the case like a practitioner
Before looking only at the outcome, separate the instrument from the surrounding transaction. Use these questions every time.
Instrument
What undertaking, payment method or document is actually involved?
What undertaking, payment method or document is actually involved?
Rules & deadline
What rules, expiry, maturity or presentation deadline controls the next step?
What rules, expiry, maturity or presentation deadline controls the next step?
Evidence
Which facts are independently verified and which are only counterparty claims?
Which facts are independently verified and which are only counterparty claims?
Bank action
What must the bank authenticate, approve, examine or settle?
What must the bank authenticate, approve, examine or settle?
Remember: a case illustrates a method of thinking. A real bank may require different documents, approvals or procedures.