Advising Bank / Confirming Bank
Banks that advise on or guarantee payment under a letter of credit.
Detailed Description
Advising Bank / Confirming Bank
What is the main function of an Advising Bank?
The Advising Bank acts as an intermediary, verifying the legitimacy of the letter of credit and communicating its terms to the beneficiary.
How does a Confirming Bank differ from an Advising Bank?
A Confirming Bank guarantees payment to the beneficiary, assuming the risk of the issuing bank's default, while an Advising Bank does not assume any payment risk.
Why are Advising and Confirming Banks important in international trade?
They provide security and trust between parties in different countries, mitigating risks associated with cross-border transactions.
What risks do Advising and Confirming Banks face?
Advising Banks risk fraudulent documents, while Confirming Banks risk default by the issuing bank, both navigating regulatory compliance challenges.
What regulatory framework governs the operations of these banks?
Their operations are governed by the Uniform Customs and Practice for Documentary Credits (UCP 600) and local regulations like anti-money laundering (AML) and know your customer (KYC) practices.