Has a 2-party LC actually a been a problem for any of you?
1. LC issuing bank is the applicant for it's own LC. or
2. LC issuing bank is beneficiary of it's own LC.
We are discussing both in commercial and standby LC and guarantee situations and would like to know if anyone has actually had a problem with these or is this just a problem in theory. It is not a problem as far as the rules (UCP and ISP and URDG) are concerned. Is it a problem in actual practice?
Thanks!
Don
2 Party LC
2 Party LC
We have had occassions to issue LCs on our own behalf, when the bank was importing certain goods for renovations. We have had no problems on these.
Regards
Regards
2 Party LC
Don,
It is not very common for bank that issue its own credit, however, there were cases that involve surety requirement for workers Comp or local government agent that accepted only surety bond, bank has no choice to issue its own credit to insurance company (bond issuer) as security for bond issuance. I don’t see there any restriction or problem for bank that issue its own credit (it is subject to reserve requirement in U.S. regardless a standby or commercial [under the Fed. Guideline])
I have a question on question 2). What is the purpose of signing an “I.O.U” to yourself except the beneficiary is your own overseas branch.
Regards,
Albert
[edited 11/2/2009 11:59:29 PM]
It is not very common for bank that issue its own credit, however, there were cases that involve surety requirement for workers Comp or local government agent that accepted only surety bond, bank has no choice to issue its own credit to insurance company (bond issuer) as security for bond issuance. I don’t see there any restriction or problem for bank that issue its own credit (it is subject to reserve requirement in U.S. regardless a standby or commercial [under the Fed. Guideline])
I have a question on question 2). What is the purpose of signing an “I.O.U” to yourself except the beneficiary is your own overseas branch.
Regards,
Albert
[edited 11/2/2009 11:59:29 PM]
2 Party LC
I’ve not encountered 1.
Regarding 2., I have heard it said that under English law a company cannot give itself an undertaking and therefore it is not possible under English law -for example- for the branch of one bank to issue an enforceable indemnity, guarantee, counter-guarantee, documentary credit or standby letter of credit in favour of another branch of the same bank.
Regarding 2., I have heard it said that under English law a company cannot give itself an undertaking and therefore it is not possible under English law -for example- for the branch of one bank to issue an enforceable indemnity, guarantee, counter-guarantee, documentary credit or standby letter of credit in favour of another branch of the same bank.