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Dear sir,

if a bank which is not a not a nominated bank under a letter of credit transaction decides to confirm a credit as silent confirmation, how can it secure its payment. what i want to know that how can it make sure that the presentation will be made to it or reimbursement will be made in its favor?

Hi Pals,

Silent confirmation is not regulated by UCP 600, you have to read the contract very well to establish if it is as you require. However, IMHO, a bank or an Export insurance, may be a governamental body, will act following domestic law rather than international rules.
Other comments appreciated

Ciao

Although what picant said is perfectly correct, there is still an option how to handle this transaction to control the operation for the benefit and safe of issuing bank (of course not 100 pct safe).
If the bank silently confirming the credit is not the nominated bank then it is outside of the credit and cannot confirm the credit in the line of UCP. Therefore the most it can do is a form of special agreement with beneficiary and nothing more.
So in order to seek protection under such a special form, the 'confirming bank' must inform the beneficiary that their undertaking is subject to presentation of documents to that bank only, and that will act FOR ON BEHALF OF BENEFICIARY towards presentation to issuing bank. Beneficiary can chose the option to present documents directly to issuing bank, right? Therefore, this ' confirming bank' may send documents for and on behalf of beneficiary and to instruct issuing bank to effect payment to a designated account. However, the confirming bank must cover some issues - documents lost in transit, (should exclude payment to beneficiary in this case) and timely presentation to their countes so that to cover the risk of late presentation to the issuing bank which the credit become in this way available with.

Silent confirmation should be regarded as a seperate undertaking from the beneficiary's bank, under which the said bank have to take all the necessary actions to secure it's funds, suggestions said would be acceptable after making sure of the beneficiary's financial position and goodwill with that bank.

Also the applicability of context of the LC terms should be examined, a good point that has been raised is to obtain the beneficiary's consent to present the documents to a "Confirming Bank" and not directly to the issuing bank not later than a specific date, to avoid any possible late presentation.

Having said that, silently confirming the credit should be encouraged by banks whoes confirmation is not required.