Hi Pals,
I have to compose an l/c that will be confirmed in full but partially by two banks, fifty fifty pro quota.
Have you some wording to send me or examples of this l/c. G. Collyer in FAQ 8.5 speaks about agreement that the two banks must sign etc.
Your help very much appreciated
You can add to this post or send by email to me picchi.antonio@virgilio.it
Thanks and Ciao
Confirmation by two banks-pro quota
-
cristiand969
- Posts: 754
- Joined: Tue Aug 05, 2008 1:52 pm
- First Name: Cristian
- Last Name: D.
- Organization: Bank
- Filter: Two Plus Two =: 4
- Location: RO
One comment
It is uncommon such a practice. It may lead to many questions as to the mandate and responsability of each bank as far as a presentation is concerned.
The normal practice would be that those banks to enter into a sindication agreement, one being the confirming bank sharing the risk between the two pro quota 50 and 50.
In your case I suppose that one confirming bank is a nominated bank and the other an advising bank or so. In such cases who and how is protected under art. 8 especially pct ii. I believe the two banks cannot negotiate same set of documents in this context or cannot negotiate for half value because the obligation of the confirming bank is to negotiate without recourse the documents for full value.
Local law may also be applicable here and with some issue. The problem may also arise:
1. when a bank consider a presentation discrepant and the other not
2. when an amendment may come and one bank will accept it and the other not.
The normal practice would be that those banks to enter into a sindication agreement, one being the confirming bank sharing the risk between the two pro quota 50 and 50.
In your case I suppose that one confirming bank is a nominated bank and the other an advising bank or so. In such cases who and how is protected under art. 8 especially pct ii. I believe the two banks cannot negotiate same set of documents in this context or cannot negotiate for half value because the obligation of the confirming bank is to negotiate without recourse the documents for full value.
Local law may also be applicable here and with some issue. The problem may also arise:
1. when a bank consider a presentation discrepant and the other not
2. when an amendment may come and one bank will accept it and the other not.
-
iLC
- Posts: 504
- Joined: Thu Jun 26, 2008 10:33 pm
as issuing bank
dear picant,
unfortunately i have never faced such a case. however i have issued LCs in syndication with other bank. the process was fairly the same as mentioned by cristaind. why do you require two confirming banks by the way. is it due to the credit line of the issuing bank being limited? do share with us about how you managed the case finally.
say LC value is 1000 USD. bank A confirmed the LC. full value document presented to bank B which negotiated the document. in this case bank A has not honor and not negotiate.
now in another case say LC value is 1000 USD. bank A confirms 500 and bank B confirms 500. document presented to bank B for full value.
scenerio 1: bank B negotiated the full value. 500 with recourse and 500 without recourse. document presented to bank A and bank A honors for USD 500, which is of course without recourse. need to mention for bank B is a nominated bank to bank A.
Scenerio 2: bank B negotiated for USD 500 without recourse. document presented to bank A. what bank A should do? honor for USD 500 or negotiate without recourse for 500. if it is honoring, then the beneficiary is getting only 500. but if it is negotiating then the beneficiary is getting 1000 from the two banks.
if there are two sets of document for 500 each, in that case we have no problem and the banks can negotiate individually. but if one sets of document, we have problem.
so i think picant should consider making two sets of document
unfortunately i have never faced such a case. however i have issued LCs in syndication with other bank. the process was fairly the same as mentioned by cristaind. why do you require two confirming banks by the way. is it due to the credit line of the issuing bank being limited? do share with us about how you managed the case finally.
dear cristian, im not sure. did i miss any point? to me the confirming bank will only honor or negotiate for the value it has confirmed. about the document being negotiated twice, i agree with you. but its a very tricky issue. here is my thoughtcristiand969 wrote:I believe the two banks cannot negotiate same set of documents in this context or cannot negotiate for half value because the obligation of the confirming bank is to negotiate without recourse the documents for full value.
say LC value is 1000 USD. bank A confirmed the LC. full value document presented to bank B which negotiated the document. in this case bank A has not honor and not negotiate.
now in another case say LC value is 1000 USD. bank A confirms 500 and bank B confirms 500. document presented to bank B for full value.
scenerio 1: bank B negotiated the full value. 500 with recourse and 500 without recourse. document presented to bank A and bank A honors for USD 500, which is of course without recourse. need to mention for bank B is a nominated bank to bank A.
Scenerio 2: bank B negotiated for USD 500 without recourse. document presented to bank A. what bank A should do? honor for USD 500 or negotiate without recourse for 500. if it is honoring, then the beneficiary is getting only 500. but if it is negotiating then the beneficiary is getting 1000 from the two banks.
if there are two sets of document for 500 each, in that case we have no problem and the banks can negotiate individually. but if one sets of document, we have problem.
so i think picant should consider making two sets of document