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:
Issuing Bank |
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.