Line allocation

[dinesh2476]

Dear Experts,

we often here the terms Line allocation/LC confirmed against issuing bank lines/Lines blocked against issuing bank.

What does it mean?

My understanding is Banks maintain a set of records that gives the amount of risk we can take against particular bank
which can be derived keeping in mind of involvment of aspects like issuing bank country risk/political risk etc and so
far the exposure against the IB in different products and also the rating by the agencies(S&P Etc...)

They collectively consider everthing before they set for risk exposure and wheneven there is situation to take exposure
against that particular bank, they deduct from it and track and ensure the risk is not crossing the limits.
.
Thanks & Regards
Dinesh Kumar

[dinesh2476]

Dear Experts,

Any opinion welcome.

Thanks & Regards
Dinesh Kumar

[picant]

Hi Pal,

I dont think that a credit line is communicated to issuing banks to confirm their documentary credits.
Banks, however, book a risk for any corrispondent with which they operate.
Then banks may have the help of so called ECA, that may insure this risk; commercial and Country risk.
A major italian bank stated that they have a shadow credit line for about 700 foreign bank, so it is possible to confirm credits issued by these banks.
Medium banks have the possibility to grant this credit line, case by case, depending on the amount, how long it lasts and the beneficiary. Sace, the italian Export Credit Agency, may cover the risk for 100%, within 2 years for many foreign banks, under an online request.
Banks that have Loro accounts may grant, in few days, a confirmation facility.
IMHO, there is not a standard process.
Other comments appreciated
Ciao