Agreement To Provide Letter Of Credit

In the late nineteenth and early twentieth centuries, travelers often carried a circular issued by a relationship bank that allowed the beneficiary to withdraw cash from other banks during their trip. This type of letter of credit was eventually replaced by traveller`s cheques, credit cards and ATMs. [4] The letter of credit has been used in Europe since ancient times. [2] Accreditations have traditionally been governed by internationally recognised rules and procedures and not by national law. In 1933, the International Chamber of Commerce oversaw the preparation of the first Customs and Practice for Documentary Credits (UCP) uniform and established a voluntary framework for commercial banks, which can be applied to transactions worldwide. [3] The beneficiary is exposed to the risk of not respecting the terms of the credit himself, of not respecting the issuing bank or of delaying the payment. These risks are considered isolated. It can be proposed as an establishment. A certified credit is a bank other than the bank issued, which guarantees accreditation. The second bank is the confirmation bank, usually the seller`s bank.

The confirmation bank ensures payment under the accreditor in case of delay of the holder and the issuing bank. As a rule, the bank issues in international transactions requires this agreement. Although letter-throughs initially existed only in the form of paper documents, they were regularly issued by telegraph in the late nineteenth century and by telex in the second half of the twentieth century. [5] From 1973, with the creation of SWIFT, banks began to switch to electronic data exchange as a means of cost control, and in 1983 the UCP was modified to allow for the “remote transmission” of accreditors. [6] In the 21st Century, the vast majority of LCs were issued in electronic form and completely “paperless” LCs became more and more frequent. [5] However, while the details of the letter of credit can be understood with some flexibility, banks must adhere to the “principle of strict compliance” when ascertaining whether the documents submitted are the documents indicated in the akkreditiv. . .