Discounting process - booking risks

[cristiand969]

Hello,
Has anyone experienced or implemented discounting export documents when:
- the discounting bank acts only as advising bank and
- credit is available and confirmed by a third bank?
.
If yes, how the risk will be booked at discounting bank if :
- documents are OK and maturity has been confirmed by confirming bank
- documents are not OK but are subsequently accepted by issuing bank (confirming bank does not confirm on their behalf maturity but only relay the issuing bank the acceptance message) .
-would you discount with or without recourse on beneficiary?
.
Is there any additional risk (based on your experience) to additionally consider ?
.
Thanks and regards
Cristian

[AmjedCDCS]

Hi Mr. Cristian

A-should apply the discounting under the confirming bank to mitigate the risks
without recourse letter from beneficiary because there's line facility between
issuing bank and the confirming bank .


B- if the advising bank acts the discount and confirm bank third party, should
the beneficiary provided the recourse letter to advising bank


thanks
Amjad

[abrar]

In effect, if a non-confirming nominated bank ( not merely an advising bank) discounts a compliant presentation, it would in effect be acting on its nomination under the terms of the UCP600 and the LC. In most cases, if the documents are compliant, such a bank would no doubt wish to reserve recourse against the beneficiary before effecting the discount.As such, my view is that the discount liability would be booked against the beneficiary in the form of a loan.

If the discount is effected against discrepant documents and which are subsequently accepted for payment at a future date by the issuing ( or a confirming bank) the initial exposure booked against the beneficiary would be transferred to that of the obligor bank as from the date of acceptance.

[cristiand969]

Well.. many thanks all of you for such explanations which are very interesting indeed !