Deal all,
pls comments:
A credit is available with a nominated bank by negotiation, and the nominated bank agreed to negotiate document when presented towards beneficiary as per sub article 12(a) of UCP 600,.
then what is the difference between the above nominated bank and a confirming bank?
regards
nesar
Distinction Between Nominated Bank And Confirming Bank
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nesarul
- Posts: 513
- Joined: Sun May 18, 2008 9:46 pm
- First Name: Nesarul
- Last Name: Hoque
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Currer
- Posts: 10
- Joined: Mon Jun 23, 2008 6:00 pm
Re: Distinction between nominated bank and confirming bank
Dear Nesar,
I assume from your posting that the nominated bank did agree to negotiate prior to presentation of documents. If that is the case than I believe the difference between a confirmed credit and that nominated bank described by you is marginal.
The nominated bank would be protected under article 7 (c) UCP600: “An issuing bank undertakes to reimburse a nominated bank that has honoured or negotiated a complying presentation and forwarded the documents to the issuing bank.”
When looking at the position of a nominated bank, it does not include any obligation “except when expressly agreed to by that nominated bank and so communicated to the beneficiary”. Thus by informing the beneficiary about its willingness to negotiate, the nominated bank entered into an obligation even though it did not confirm the credit.
Such communication of an agreement to act on a nomination is not defined in the UCP and a bank would be careful about the wording of such communication. One issue which is of importance is the issue of amendments. Considering article 10 (a) UCP600 it should be noted that only the confirming bank is included in the list of banks which need to give their agreement to an amendment. A nominated bank acting on its nomination is not included. Thus the nominated bank in your scenario would probably make its agreement to negotiate subject to its agreement to any subsequent amendment.
In case of agreeing to act only at or after presentation of documents the difference for the beneficiary is that he would not be sure whether the nominated bank will negotiate up until it decides after presentation of documents. Beneficiaries under confirmed documentary credits have this protection already with the advice and are therefore protected throughout the preparation of presentation of documents.
Kind regards
Currer
I assume from your posting that the nominated bank did agree to negotiate prior to presentation of documents. If that is the case than I believe the difference between a confirmed credit and that nominated bank described by you is marginal.
The nominated bank would be protected under article 7 (c) UCP600: “An issuing bank undertakes to reimburse a nominated bank that has honoured or negotiated a complying presentation and forwarded the documents to the issuing bank.”
When looking at the position of a nominated bank, it does not include any obligation “except when expressly agreed to by that nominated bank and so communicated to the beneficiary”. Thus by informing the beneficiary about its willingness to negotiate, the nominated bank entered into an obligation even though it did not confirm the credit.
Such communication of an agreement to act on a nomination is not defined in the UCP and a bank would be careful about the wording of such communication. One issue which is of importance is the issue of amendments. Considering article 10 (a) UCP600 it should be noted that only the confirming bank is included in the list of banks which need to give their agreement to an amendment. A nominated bank acting on its nomination is not included. Thus the nominated bank in your scenario would probably make its agreement to negotiate subject to its agreement to any subsequent amendment.
In case of agreeing to act only at or after presentation of documents the difference for the beneficiary is that he would not be sure whether the nominated bank will negotiate up until it decides after presentation of documents. Beneficiaries under confirmed documentary credits have this protection already with the advice and are therefore protected throughout the preparation of presentation of documents.
Kind regards
Currer