Lesson check0 / 2 answered · 0 correct
Check 1
Which is the best statement?
Check 2
If required documents cannot be produced, does a huge LC amount solve the problem?
Financeability, Negotiation and Discounting
Learn what people often mean when they say 'monetise the LC'.
Use clearer words
People often say 'monetise an LC'.
A bank may instead discuss negotiation, discounting, financing, purchasing a receivable or another specific trade-finance structure.
The exact legal and banking structure matters.
The three-question test
Question 1: Is the LC genuine and properly authenticated?
Question 2: Can the beneficiary make a complying presentation?
Question 3: Will a financier accept the bank, country, tenor, transaction and other risks?
What a financier may look at
Issuing-bank risk.
Confirmation or other bank risk support.
Tenor and maturity.
Currency and amount.
Documentary complexity.
Country and transfer risk.
Trade purpose and KYC.
Whether documents have already been presented and accepted.
Any discrepancies.
Why amount is not enough
A very large LC can still be unattractive if the issuing bank is not acceptable or the document conditions cannot be met.
A smaller LC from a bank the financier accepts can be easier to consider.
Deferred payment can still be financed
A future payment obligation can potentially be discounted or financed depending on the structure and bank appetite.
This is why 'usance' does not automatically mean 'not financeable'.
Remember thisGenuine ≠ drawable ≠ financeable.
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