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

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.

Letter of credit is an international payment method. 

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.

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.

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.