Negotiation Under Reserve / With Recourse
Posted: Mon Sep 23, 2013 5:10 am
I would like to have your advices about negotiation Under reserves and negotiation with recourses.
The general meaning of negotiation with recourses is that the negotiationg bank pay the beneficiary on presentation of the conform documents and in case the issuing bank doesn't reimburse the negotiating bank for whatever reason (discrepancies or Financial failure of the issuing bank), then the negotiating bank has a recourse against beneficiary to get back its money.
The general meaning of negotiation Under reserves is that in case of minor discrepancies in the documents presented by the beneficiary, then the negotiating bank can nevertheless pay the beneficiary but with the condition that in case the issuing bank refuses the documents, then the negotiating bank can get back its money.
It means that in case of negotiation Under reserves, the negotiating bank takes the risk of a Financial failure of the issuing bank (which is not the case with the payment with recourse)
Now let's consider the case of a negotiating bank which has confirmed the credit. If on presentation of the documents, there is no discrepancies and documents comply with credit terms, then usually the bank can negotiate the documents with recourses (in order not to take the risk of a Financial failure of the issuing bank, which is quite normal as the bank has not given its confirmation).
Now if the documents presented are discrepant (with minor problems), the the bank can negotiate Under reserves and take the risk of a Financial failure of the issuing bank.
I would like to have your advices about the following :
Why a negotiating bank which would be ready to negotiate with recourse when conform documents are presented could be ready to negotiate Under reserves when the documents show some minor discrepancies (and in fact take more risk than in a negotiating with recourses)????. What I don't understand is why the negotiating bank doesn't protect itself in the same way in the 2 procedure?
In my opinion, if the negotiating bank is ready to pay with recourse when complying documents are presented, it will not be ready to negotiate Under reserves when the same documents are presented with minor problems. According to me, the bank could negotiate Under reserves for the goods clients, but the reserves are that payment is final on the condition that the issuing bank gives a waiver of the discrepancies and on top of that the negotiating bank get the payment of the issuing bank.
Please let me have your valuable advices
The general meaning of negotiation with recourses is that the negotiationg bank pay the beneficiary on presentation of the conform documents and in case the issuing bank doesn't reimburse the negotiating bank for whatever reason (discrepancies or Financial failure of the issuing bank), then the negotiating bank has a recourse against beneficiary to get back its money.
The general meaning of negotiation Under reserves is that in case of minor discrepancies in the documents presented by the beneficiary, then the negotiating bank can nevertheless pay the beneficiary but with the condition that in case the issuing bank refuses the documents, then the negotiating bank can get back its money.
It means that in case of negotiation Under reserves, the negotiating bank takes the risk of a Financial failure of the issuing bank (which is not the case with the payment with recourse)
Now let's consider the case of a negotiating bank which has confirmed the credit. If on presentation of the documents, there is no discrepancies and documents comply with credit terms, then usually the bank can negotiate the documents with recourses (in order not to take the risk of a Financial failure of the issuing bank, which is quite normal as the bank has not given its confirmation).
Now if the documents presented are discrepant (with minor problems), the the bank can negotiate Under reserves and take the risk of a Financial failure of the issuing bank.
I would like to have your advices about the following :
Why a negotiating bank which would be ready to negotiate with recourse when conform documents are presented could be ready to negotiate Under reserves when the documents show some minor discrepancies (and in fact take more risk than in a negotiating with recourses)????. What I don't understand is why the negotiating bank doesn't protect itself in the same way in the 2 procedure?
In my opinion, if the negotiating bank is ready to pay with recourse when complying documents are presented, it will not be ready to negotiate Under reserves when the same documents are presented with minor problems. According to me, the bank could negotiate Under reserves for the goods clients, but the reserves are that payment is final on the condition that the issuing bank gives a waiver of the discrepancies and on top of that the negotiating bank get the payment of the issuing bank.
Please let me have your valuable advices