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.
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| Differences Between Advising Bank and Nominated Bank |
Definitions:
Advising bank is the bank that advises the letter of credit to the beneficiary. Advising banks act upon the request of issuing banks.
Nominated bank means the bank with which the credit is available or any bank in the case of a credit available with any bank.
Differences:
Generally, if the nominated bank and the beneficiary are located in the same country, the nominated bank chooses direct advise of the credit to the beneficiary without using another bank's services. In a such case, the nominated bank also acts as an advising bank.
If the nominated bank elects to use another bank's services to advise the credit to the beneficiary, it is obvious that both the nominated bank as well as an advising bank is present in the transaction.
Payment Obligation:
The advising bank has no payment obligation against the beneficiary.
The nominated bank, on the other hand, may be liable to pay the credit amount to the beneficiary. But this will be the case, only when the nominated bank expressly agreed to pay the credit amount to the beneficiary.
Nominated bank's payment obligation may be fulfilled by the nominated bank with recourse basis, which means that in case nominated bank could not get the reimbursement from the issuing bank, the nominated bank will turn the beneficiary for recompensation.
Place of Presentation:
Advising bank's counters have no value as a place of presentation. As a result, the presentation will not be regarded as completed until reaches to the nominated bank's counters or else the issuing bank's counters.
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