Swift has lately posted on their web that category 7 standards may not be used to transport non-bank-issued letters of credit.
(http://www.swift.com/index.cfm?item_id=43320).
What is your view on this issue?
Non Bank LC
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KarenHan_disabled
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larryBacon
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Non Bank LC
As is customary for ICC Banking Comm. Opinions, this deals with a single query. Although examples are given of non-banks by the correspondent, the opinion does not state whether it agrees with such examples; nor does it define what is a non-bank.
Neither does SWIFT define a non-bank, nor does it even refer to examples.
Banks perform a myriad of roles. Some banks focus on a few of these roles, others on many. Where do we draw the line to say which is a non-bank ?
Without such a definition, how can one interpret the SWIFT instruction not to advise a non-bank-issued LC ?
Laurence
Neither does SWIFT define a non-bank, nor does it even refer to examples.
Banks perform a myriad of roles. Some banks focus on a few of these roles, others on many. Where do we draw the line to say which is a non-bank ?
Without such a definition, how can one interpret the SWIFT instruction not to advise a non-bank-issued LC ?
Laurence
Non Bank LC
Hi Ahming,
SWIFT has revised its decision in relation to
this issue in order to cater for for nonbank-issued
letters of credit.
An article included on Focus (11 January) covers the action taken by
the Trade Finance Maintenance Working Group in relation to the Category 7 Standards.
I have copied the text of of it below...
-------------------------------------
Trade Finance Maintenance Working Group reverses its earlier decision
The Trade Finance Maintenance Working Group (TFMWG) agreed in
September 2004 to restrict Category 7 standards to bank-issued
letters of credit. At the request of the US banking community
this agreement was recently re-evaluated by the Working Group.
The business practice of issuing nonbank letters of credit is
used significantly more in the US than in other countries. US
institutions argued that restriction of the SWIFT Category 7
standards to bank-issued letters of credit would prevent US
banks from offering a full range of trade services to their
corporate customers. The TFMWG agreed, and also recognised that
this business practice might be taken up in other countries
to enhance service offerings.
To cater for nonbank-issued letters of credit, the TFMWG has
therefore revised its decision. A temporary way forward for the
current Category 7 standards has been agreed.
In the 2005 version of the SWIFT User Handbook, a usage rule will
be added that makes clear that it is the responsibility of the
sender of the MT 710 and MT 720 to inform the receiving bank
about the issuer's nonbank status. This rule will come into effect
with the Standards Release of 14 May 2005.
SWIFT has revised its decision in relation to
this issue in order to cater for for nonbank-issued
letters of credit.
An article included on Focus (11 January) covers the action taken by
the Trade Finance Maintenance Working Group in relation to the Category 7 Standards.
I have copied the text of of it below...
-------------------------------------
Trade Finance Maintenance Working Group reverses its earlier decision
The Trade Finance Maintenance Working Group (TFMWG) agreed in
September 2004 to restrict Category 7 standards to bank-issued
letters of credit. At the request of the US banking community
this agreement was recently re-evaluated by the Working Group.
The business practice of issuing nonbank letters of credit is
used significantly more in the US than in other countries. US
institutions argued that restriction of the SWIFT Category 7
standards to bank-issued letters of credit would prevent US
banks from offering a full range of trade services to their
corporate customers. The TFMWG agreed, and also recognised that
this business practice might be taken up in other countries
to enhance service offerings.
To cater for nonbank-issued letters of credit, the TFMWG has
therefore revised its decision. A temporary way forward for the
current Category 7 standards has been agreed.
In the 2005 version of the SWIFT User Handbook, a usage rule will
be added that makes clear that it is the responsibility of the
sender of the MT 710 and MT 720 to inform the receiving bank
about the issuer's nonbank status. This rule will come into effect
with the Standards Release of 14 May 2005.