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Would you please clarify the issue that a bank may extend a credit facility against having a sight & confirmed Lc with the following information?

1-Issuing bank advised a sight Lc to its branch asking it to add its confirmation (lc is available and confirmed by this branch)

2-At the same time issuing bank asked its branch to advise Lc to benefciary through another bank (advising and benef.bank located at the same country)

3- Second advising bank advised Lc to benef. without adding its confirmation (only confirmed by first advising bank).

4-Having a credit the benef applied to his bank (advice through) to get a credit facility for 50% of Lc value.

5-Taking into account the benef. is a new customer and have no trace record in credit department, so what are the requirements (cautions) to be done by the second advising bank(for both credit &Lc dept.) before approving the facility and what are the risks involved?

thanking in advance for yr favourit reply

dear shoura,

its a question that basically relates to the internal credit policy of the bank and not to UCP. you need to understand that a payment mechanism under a letter of credit is only triggered when there is a complying presentation. assuming that the beneficiary is honest, to make complying presentation the beneficiary has to ship goods which may often be dependent on the manufacturing capacity of the beneficiary. so its not really about making a complying presentation but also about the experience and management capacity of the beneficiary.

given the present economic turmoil, i really dont think that any bank will be willing to take risk for a new customer unless supported by collateral.