Syndication and Participation

[Kaash]

Hi

Can anyone please throw some light onthis question
What is the Difference between Syndication and Participation
?

[Veerla]

Two aspects of the same.
Syndication denotes a club of Banks/Institutions who issue a Standby. Beneficiary can make presentation to 'any' member Bank of the Syndicate.
Participation is Applicant's Bank/Institution distributing risk to other Banks/Institutions w/out disclosing the same to the Applicant.

[Westley]

Hello Kaash,

I agree with everlasting that Syndication and Participation are similar.

I would like to add as follows:

Syndication can be of two types: fronted and severally obligated.

Fronted LC are those where, the instruments do not indicate the participating banks names and the fronting bank (issuing bank) is responsible to pay the beneficiary upto the amount of the LC if called upon to do so.

Severally obligated LC's indicated the participants names and the percentages that each participant is responsible for. The issuing bank is responsible for its share only. Upon receipt of a compliant demand the issuing bank will pay its percentage share and inform the participants of the demand. Upon receipt of the funds from the participants, the issuing bank will pay the beneficiary.

Hope this is helpful.

Other comments welcome.

Westley

[Pinkieratsela]

For simpler understanding, I believe the difference is that Syndication occurs when other banks are approached BEFORE the LC is issued and Participation when the other banks are approached AFTER the LC has been issued.

I stand to be corrected.