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Hi, kindly advise what risks are there to the issuing bank if credit calls for a set of negotiable documents
To be forwarded directly to the applicant. I know they can clear their goods. Also it should be risky to the beneficiary and confirming bank (if any). But as an issuing bank is there any risk to us if we issue against a credit line? Also what if the applicant gets liquidated. Thank you in advance.

Your clarification is more to do with banking operations than a responsibility of a Issuing bank. It is interesting to note the tenor of your question wherein you had indicated that a LC is issued against a credit line an hence you will be honouring the documents, if otherwise in order, be debiting the credit line automatically. In such a scenerio what is the risk issuing banker is running into? I have only reworded your question to get confirmation that I have understood you correctly.

The LC becomes a unsecured one, if the applicant to the LC has acccess to the goods. Hence policies of your bank becomes operative. Technically the financial powers would come into play. If that is satisfied then you do not run the administrative risk.

Secondly, to ensure that you have sufficient credit line available, you should block the credit line to the amount of LC issued, so that you would be in a position to honour the documents on complying presentation. If that is ensured that you do not run the financial risk on account of LC, but continue the risk with line of credit.


CVRK

The best answer you will get will come from your RISK department!

there is risk in almost every type of LC. even when the goods are consigned to the bank, there is still risk. a fraudster has 100 ways. anyway, when you are doing anything against a credit line, it is expected that the credit department has judge the client well.