DUAL ROLE UNDER LC BY A BANK

[mmsaleem]

Ladies & Gentlemen,

I am not sure if fellow commercial banks handling LCs for their clients have encountered LC transactions where both beneficiary and applicant have accounts with the same bank and both parties have mutually agreed to have an LC issued by the same bank and advised accordingly.

My concerns here from fellow trade practitioners in banks are as follows.

-If at the request of the applicant, a bank has been requested to issue a confirmed LC, what is the view of trade specialists in terms of viability of such arrangment? Can an issuing bank confirm the LC to its beneficiary and what is the value addition in this scenario?
Does it make trade sense and is it within UCP rules to state that a bank having issued the LC at the instruction of the applicant has advised the LC and confirmed to a beneficiary within the same bank for 3 reasons.
1-It is the desire of the beneficiary to receive and being adised a confirmed LC by the same bank
2-Because of the tenor of the terms being 360 days from delivery date, the beneficiary will seek discounting of the LC docs from the same bank playing dual role.
3-The bank playing the dual role will structure the LC terms as available with itself by negotiation and draft at 360days from delivery date.
4-Within charges clause applicant have agreed on the draft that all charges will be paid by beneficiary except confirmation fee will be on account of applicant

Any shared experience and invaluable contribution towards interpretation of above scenario will be appreciated.

Kindest regards
Salim

[picant]

hi Pal,
no confirnation necessary, the issuing bank is the only liable. Being a domestic l/c laws may allow or refuse to discount it,
issuing bank will inform beneficiary in advising.I think that the issuing bank must honour(draft drawn on issuing bank) and not negotiate. There are no confirmation costs, but issuing costs are to be born by applicant.
Other comments appreciated
Ciao

[hardy2175]

'Confirmation by an issuing Bank is an OXYMORON - Just cannot be done. However some other bank can certainly confirm the LC
As far as both the applicant and the beneficary being clients of the same Bank . The bank is to do the transactions at arms length and strictly in accordance with the UCP and other extant rules so there is no problem there.
On submission of complying docs the bank can also choose to advance funds to the bene.