Hi !
my name is esra from turkey .
have you heard anything about confirmation of a payment guarantee ? I am informed that in romania it is very common. The structure is ,one bank in country A issues a payment guarante in favour of an exporter , a bank in Country B(generally the exporter's country) confirm the guarante.It is used because the exporter does not know the bank in country A and wants to have the confirmation of its bank.thank you for your help
confirmation of LG
confirmation of LG
Esra,
With credits and standbys the obligations of a confirming bank / confirmer are set out in the UCP / ISP. However, the URDG does not have provisions covering confirmation and anyway few demand guarantees are stated to be subject to ICC rules. So what obligation does the ‘confirmer’ of a guarantee have? This uncertainty means 'confirming' or ‘joining in’ demand guarantees is a rarity.
Where the potential guarantee beneficiary does not know the principal’s bank in country A the usual approach is for the principal’s bank (the instructing party) to ask a bank in country B (the guarantor) to issue a guarantee against the instructing party’s counter-guarantee. (I use URDG terminology here.) This is often known as an ‘indirect’ guarantee transaction.
Obviously, if the payment guarantee takes the form of a standby letter of credit one does not need to go through this rigmarole and confirmation can take place in the normal, routine way.
Jeremy
[edited 3/2/2007 4:56:58 PM]
With credits and standbys the obligations of a confirming bank / confirmer are set out in the UCP / ISP. However, the URDG does not have provisions covering confirmation and anyway few demand guarantees are stated to be subject to ICC rules. So what obligation does the ‘confirmer’ of a guarantee have? This uncertainty means 'confirming' or ‘joining in’ demand guarantees is a rarity.
Where the potential guarantee beneficiary does not know the principal’s bank in country A the usual approach is for the principal’s bank (the instructing party) to ask a bank in country B (the guarantor) to issue a guarantee against the instructing party’s counter-guarantee. (I use URDG terminology here.) This is often known as an ‘indirect’ guarantee transaction.
Obviously, if the payment guarantee takes the form of a standby letter of credit one does not need to go through this rigmarole and confirmation can take place in the normal, routine way.
Jeremy
[edited 3/2/2007 4:56:58 PM]
confirmation of LG
Just so. If an independent guarantee is issued subject to ISP98, then everybody can determine from ISP98 what the guarantee means if it authorizes confirmation and what any confirmation means if it is issued. Otherwise, there is likely to be considerable uncertainty about the scope of the banks' obligations and reimbursement rights. Regards, Jim Barnes
confirmation of LG
Thank you for your comments. In fact Jeremy We also recommended our customer counter guarantee but since he does not want to pay double commission to both banks,he does not prefer the counter guarante. I know very well it does not sound very logical.But the customer insisted on this form.
confirmation of LG
Esra,
I am confused. Surely there will be ‘double commission’ if another bank is ‘confirming’ your demand guarantee, just as there would be if another bank was confirming a credit / standby issued by your bank? Two banks incurring a liability automatically must mean two sets of charges, whatever the structure of the transaction.
Jeremy
I am confused. Surely there will be ‘double commission’ if another bank is ‘confirming’ your demand guarantee, just as there would be if another bank was confirming a credit / standby issued by your bank? Two banks incurring a liability automatically must mean two sets of charges, whatever the structure of the transaction.
Jeremy
confirmation of LG
You are exactly right Jeremy. However we do not think charging anything if we do transaction tby this way. In fact we gave up to do this transaction because as you said it is not logical structure.thank you for your informative comments.Esra