What are the Differences Between Confirming Bank and Nominated Bank?

In theory, it is possible that a nominated bank and a confirming bank are present as two separate banks in a letter of credit transaction.

But in reality it occurs very seldom, mainly because of the fact that confirming banks do not add their confirmations to letters of credit, which are not available by themselves.

The roles and responsibilities of the nominated bank and the confirming bank are significantly different. For this reason, exporters and importers need to understand the key distinctions between these two banks.


On this post, you can find not only the definition of a nominated bank and a confirming bank according to letter of credit rules, but also how they differ from each other.

What are the Differences Between Advising Bank and Nominated Bank?

In most cases, the advising bank and the nominated bank is the same institution in a typical letter of credit transaction.

Only in rare occasions, these two banks are apart from each other.

Because, there are significant differences exist between the advising bank and the nominated bank, each side of the transaction, both exporters and importers, should understand the roles and responsibilities of these two banks very well.

On this post, you can find not only the definition of advising bank and nominated bank according to letter of credit rules, but also the main differences between these two banks.

Differences Between Advising Bank and Nominated Bank
Differences Between Advising Bank and Nominated Bank

Nominated Bank

On this article you can find the definition of a nominated bank, its roles and responsibilities in a typical letter of credit transaction.

Definition: According to current letter of credit rules, UCP 600, nominated bank means the bank with which the credit is available or any bank in the case of a credit available with any bank.

Nominated bank has two main functions under a letter of credit transaction.

Firstly, a nominated bank is the presentation point of the documents. As a result, a beneficiary complete its presentation by submitting documents to the counter's of the nominated bank within the time frame indicated in the letter of credit.

Secondly, a nominated bank may act as a discounting bank by purchasing a time draft or documents that have been submitted by the beneficiary and found to be complying by the nominated bank.

Roles and responsibilities of a nominated bank in a letter of credit transaction.
Nominated Bank
After briefly defining what nominated bank is and explaining its functions, now we can look further into different aspects of nominated bank.

Confirming Bank

On this article you can find the definition of a confirming bank, its roles and responsibilities in a typical letter of credit transaction.

Confirming bank means the bank that adds its confirmation to a letter of credit upon the issuing bank's authorization or request.

In some situations, issuing banks' payment undertakings would not be sufficient for beneficiaries. This is especially true, when letters of credit are opened from one of the high political and financial risk possessing countries.

If the beneficiary figured it out that the issuing bank or issuing bank's country is not reliable enough, then the beneficiary may seek another bank's payment guarantee added to the letter of credit in addition to issuing bank's payment undertaking.
Roles and responsibilities of a confirming bank in a letter of credit transaction.
Confirming Bank
The process as explained above is called confirmation and the bank which adds its confirmation to the letter of credit is known as the confirming bank.

What are the Differences Between Advising Bank and Issuing Bank?

On this article you can find not only the definition of an advising bank and an issuing bank, but also their differences in a typical letter of credit transaction.


It is significantly different than other payment options in international trade, mainly because of the fact that letter of credit is governed by banks.

As a result it is a vital importance to understand banks, their roles and responsibilities in order to act correctly under a letter of credit transaction.

Advising Bank is the bank that advises the letter of credit to the beneficiary. 

Issuing bank, on the other hand, is the bank that issues a letter of credit at the request of an applicant or on its own behalf.

After making the definitions, we can now proceed to understand the key differences between advising banks and issuing banks.

Issuing Bank

On this article you can find the definition of an issuing bank, its roles and responsibilities in a typical letter of credit transaction.

Letters of credit transactions are started and ended by issuing banks.

An issuing bank negotiates with the applicant to draft the letter of credit, determines the conditions for payment, issues it in swift format and transmits it to the advising bank.

Advising bank, confirming bank, nominated bank are all selected by the issuing bank, as well. Additionally, payment or refusal decision is given by the issuing bank, at the end of the transaction.

Issuing bank sits on the core of letters of credit and today, we are going to understand, why.

Let me start my article with the definition of the letter of credit:
the definition of an issuing bank, its roles and responsibilities in a typical letter of credit transaction.
Issuing Bank
According to letter of credit rules, letter of credit means any arrangement, however named or described, that is irrevocable and thereby constitutes a definite undertaking of the issuing bank to honour a complying presentation.

The same rules define issuing bank is the bank that issues a letter of credit at the request of an applicant or on its own behalf.

Advising Bank

On this article you can find the definition of an advising bank, its roles and responsibilities in a typical letter of credit transaction.

Advising Bank is the bank that advises the letter of credit to the beneficiary. Advising banks act upon the request of issuing banks.

Generally, advising banks are located in the same country as beneficiaries. That is why issuing banks need their services.

Letters of credit are transmitted between banks via an online platform called Swift.

Swift platform is secure and fast, but it is expensive. That is why most of the exporters and importers do not have an access to the Swift platform.

In today's international trade world, letters of credit are transmitted from issuing bank to the advising bank via swift platform and afterwards advising banks advises the credits to the beneficiaries other means of telecommunication such as email attachments of .tif or .html files.

advising bank, its roles and responsibilities

Important Note: You should keep in mind that swift is an authenticated teletransmission platform. A letter of credit or amendment transmitted via swift is deemed to be the operative, and any subsequent mail confirmation is not needed and shall be disregarded.

Letter of Credit Basics: Risks in Letters of Credit

Each international trade transaction carries a risk, lower or higher.

Some trade relationships might have been established for a long period of time between importers and exporters, whom are located in safe countries with sound financial backgrounds.

In such a scenario, we can talk about two professional partners, working for a win-win situation, both of them understanding its roles and responsibilities in order to complete the transaction in a good manner.

Concluding these kinds of transactions financially would not be a difficult task.

Now, I want you to think just an opposite scenario. Potential trade is about to initiate between an importer and exporter, whom has no enough knowledge about the counter party. Even more, at least one party is located in a politically unstable country.

What do  you think. Which payment method should be chosen to satisfy both parties under such extreme conditions?

Do you think that you can find a risk free payment method that you can rely on regardless of the surrounding conditions?

Above, I have tried to illustrate two different conditions effecting the payment selection decisions in international trade.

What sort of risks each letter of credit party has to bear in export and import transactions?

On this post, I will try to explain the risks associated with international payment methods in general.

Specifically, I will emphasize the risks in letters of credit for different parties perspectives.

Letter of Credit Basics: L/C Transaction

How does a letter of credit work? How to use a letter of credit in import and export businesses?

So far, I have published two articles under "Letter of Credit Basics" series at advancedontrade.com

First article was published with the following title: "Letter of Credit Basics: Definition and Types". Second article's title was "Letter of Credit Basics: Parties to Letters of Credit".

This is the 3rd article of "Letter of Credit Basics" series and it will be focused on letter of credit transaction process.

With the help of an illustration and detailed explanations, letter of credit transaction will be covered from beginning to end.

How does a letter of credit work?

After reading this article, you should be able to answer questions such as:
  • Who is initiating the letter of credit issuance process? Importer or exporter?
  • Which party advices the credit to the exporter?
  • Which party / parties must pay letter of credit amount to the beneficiary against a complying presentation?

Letter of Credit Basics: Parties to Letters of Credit

Letter of credit is a payment method in international trade. It is usually shortened as L/C or DLC. DLC means Documentary Letter of Credit or Documentary Credit. 

As of yesterday, I have started to write down a new series of articles regarding letters of credit. The 1st article was about the definition and types of letters of credit.  

Today, on this article, I will try to introduce you the parties to a simple letter of credit transaction. Each L/C party will be presented briefly and its role will be explained with the help of the graphic images. 

In a typical letter of credit transaction, one should expect to see following parties: applicant, beneficiary, issuing bank, confirming bank, nominated bank and reimbursing bank.

Parties to Letters of Credit

Let us start understanding these parties along with their roles and responsibilities one by one below.

Letter of Credit Basics: Definition and Types

Letter of credit is a payment method used in international trade transactions.

The letter of credit is distinguished itself from other payment methods in international trade by its complex structure and detailed rules.

Due to this complex structure, many international trade personnel have facing difficulties in letter of credit transactions.

Starting with today's post, I will be writing articles regarding different aspects of letters of credit. Hoping that my posts will be helping you out in your daily work.

The first article not only explains letter of credit definition but also defines letters of credit types.

Letter of Credit Definition | Letter of Credit Types