Credit is available with any bank and unrestricted for negotiation

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Maff
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Joined: 05/28/2009
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Hello,

An LC contains the following special condition:

'Credit is available with any bank and unrestricted for negotiation'.

Can anyone please explain in simple terms what exactly this means?  Also is it more risky for me as beneficiary to accept and LC with the above wording rathern than say 'Credit is available with XX bank by payment at sight'?

Looking forward to a reply

Thanks

Maff

Abrar
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Joined: 03/12/2009
unrestricted negotiation

As a beneficiary, this provides you with maximum flexibility, without any additional risk.  Instead of being required to present documents to a specific bank, you can present documents to any bank, and provided such bank is willing to handle the transaction, you can request them to examine and negotiate the documents. I assume the LC is unconfirmed?

Although, as a beneficiary this will not concern you, the issuing bank's obligations to "any" bank is the same as if the LC had been restricted for negotiation with a specific bank.

The advantage for you is that in theory, you would be able to shop around to see which negotiating bank was willing to negotiate, and at what price.

If you require a "silent confirmation", with the ability to shop around,  this would be easier to achieve under a freely negotiable LC, than a restricted LC.

Catalyst
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Joined: 06/15/2007
Unrestricted negotiation

Additionally, if the beneficiary/exporter has in place export bill negotiation/discounting facilities with more than one bank, and the limit with a particular bank is fully utilised, the exporter can take his bills to another bank and get them negotiated (without being forced to amend the LC).

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Have a great day!

warlord9609
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Joined: 10/28/2008
Procedure of Silent connfirmation

Dear Abrar,

 

Regarding silent confirmation, how it works from the beginning ?  what we mention in the MT700 and how its approved by the banks , do they say for instance ( we confirm silently^^ ?).

 

Your expert opinion is highly appreciated.

 

 

Abrar
Offline
Joined: 03/12/2009
Silent Confirmation

Hi Warlord

Obviously the incoming MT700 will not mention that the LC may be silently confirmed (field 49 will state "WITHOUT"), but provided the nominated bank, or "any" bank is willing to "silently" confirm, the confirming bank will wish to draw up a set of agreements with the beneficiary, such as for example, that the beneficiary is restricted from accepting an amendment without the confirming bank's approval, and that the bank is a nominated assignee under the LC proceeds.

The first issue is important, because the confirming bank does not enjoy the protection of a confirming bank, as under Art. 10 a. The second issue is important to enable the confirming bank to step into the shoes of the beneficiary, in order to pursue a claim against the issuing bank,if necessary.

The confirmation advice from the bank is likely to set all these out in detail, but will vary from bank to bank.

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