BCR Publishing
We are the leading provider of news, market intelligence, events and training for the global receivables finance industry.
Working with industry leading organisations, experts, governments and universities, BCR Publications delivers expertise in factoring, receivables and supply chain finance to a global audience.
BCR has long been a beacon of innovation and excellence in the realm of receivables finance, playing an instrumental role in shaping the industry’s international landscape. Through its comprehensive conferences, insightful publications, and thought leadership, BCR has facilitated crucial dialogues and connections among industry professionals, driving forward the development of receivables finance globally.
Follow BCR Publishing
Free passes
For corporate treasurer roles/functions!
Corporate Trade Finance Products : Letter of Credit
| 11-10-2018 | by Nijay Gupta | treasuryXL |
What is Letter of Credit/Documentary Credit under UCP 600 – ICC Paris:
A letter of Credit is a sort of Guarantee issued by a Bank – Opening Bank, on behalf of a buyer(applicant) favouring the seller (Beneficiary) to honour the compliant documents presented thru a Bank (negotiating bank) in terms of the LC conditions. In order to secure payment, the Supplier of goods is given a sort of guarantee by the buyer’s bank to pay (at Sight or Usance or Deferred Payment) on presentation of Documents in terms of LC. So, the LC can provide payment on Sight Basis, Usance Basis or Deferred Payment Basis, based on the Terms of Payment agreed between Supplier & Buyer. The buyer/Opener of the LC is assured Delivery of Goods within the dates of shipment mentioned in the LC.
LC is also known as Documentary Credit, as banks deals in documents and not in goods.
The LC is governed by the UCP 600 (2007) Revision publication by ICC, Paris, provides the set of rules governing LC in Domestic/International Trade in almost all 175 countries. The 39 Articles of UCP 600, gives the details of the various types of LC’s, role/rights/liabilities of various parties i.e.
Advising Bank (Correspondent bank of the LC issuing bank), may act as LC Transferring or Negotiating Bank too for the availability of LC for Negotiation leads to be known as : Restricted LC or LC avaialable with…. Bank
Negotiating Bank (Generally Sellers Bank),
Re-imbursing Bank (generally overseas correspondent bank, where the LC issuing bank maintains its Nostro a/c).
The articles also provide the way various Documents like Bill of exchange, Invoices, Cerifiticate of Origin, BL/AWB, Inspection Certificate, Insurance Policy etc to be preapred and presented to the LC Issuring bank for Payment (Sight document), Acceptance & Payment (Usance/Deferred Payment documents).
What are the various Types of Documentary Credit:
Irrevocable: The LC, which can not be cancelled/amended without the consent of all the parties to the LC, is the most common type of LC is used in Domestic/International Trade. In this, the LC issuing bank guarantees the payment of LC as per the Tenor of the Documents on presentation of compliant documents to the beneficiary.. This is the most common type of LC is used in domestic/international Trade. All types of LC’s are Irrevocable, unless a bank issues Revocable LC, specifically. UCP discussed only about issuing of Irrevocable LC, though the banks can issue Revocable LC or combination of other types of LC as below.
Revocable LC, (which could be cancelled by LC issuing Bank or Applicant without the consent of Beneficiary before the shipment is made) is not in practice and not provided in UCP 600, though the same can still be established by the LC Issuing bank at the request of the Applicant. Irrevocable Confirmed: In this type of LC, the Payment Guarantee is given by LC Advising or a Bank nominated by LC issuing Bank . The bank adding confirmation to the LC is done only at the request of LC issuing bank and the Conforming bank can be in the country of exporter or elsewhere. Since this type of LC requires payment of confirmation charges by the Beneficiary, the use of this type of LC is restricted in case of Geo-political conditions in the buyer country or high risk buyer only.
Irrevocable Transferable: The LC which can be transferred by the Advising Bank at the request of Beneficiary, in part/full or for lesser amount by keeping the profit for the beneficary of LC. Once LC is Transferred, it can not be transferred back to Benficiary of LC. Under this, the LC Transferring bank is the only bank authorised to Negotiate/Pay for documents over and above the LC opening bank
Irrevocable Confirm: LC can be confirmed by a bank in Beneficiary’s Country (generally done by LC Advising bank) or by a bank in other country, when beneficiary is not very sure about the standing of the LC issuing bank or Geo-political situation in buyer’s country. LC is confirmed at the request of LC issuing bank and Confirming bank may ask beneficiary to pay for the confirming charges. On presentation of documents, confirming bank shall becoming like LC issuing bank and is bound to pay/accept documents, as per LC conditions.
Irrevocable Back to Back: Its not provided in UCP but its used by Beneficiary for opening another/local LC backed by the Original LC on same terms and conditions to provide security for payment for supply of goods to the origianl beneficiary .
Irrevocable Revolving: This type of LC provides flexiblity of Re-instating the amount of the LC, on utilisation of the LC amount by exporting the goods as per terms of LC. This type of LC is usefull, for exports of different goods at different period without committing the total value of all exports in one LC. This reduces the requirement of lower LC limit or Cash margin for opening of the LC by applicant (importer).
Irrevocable Stand-By LC: This was inititated at the time when US banks were not authorised to Issue Guarnatees or take Guarantees . But this is very popolus amongst the suppliers of goods and services in today’s time all over the world. This type of LC, provides a guarantee to the supplier of services, equipments, airlines etc to be paid on completion of the serives or agreed time period. Its very common in Airlines and Equipment suppliers on lease or rental basis.
Which type of LC is desirable in Domestic & International Trade:
An Irrevocable LC is quite fine, which allows payment on compliance with the LC terms and this also allows surety of shipment by exporters within the terms mentioned in the LC, though there is no guarantee of quality of goods being supplied by the exporters. That is why Banks say, Bank Deal in Documents and not in Goods and its known as documentary credit.
Should there be a Geo-political situation in the LC issuing bank’s country or the standing of the LC issuing bank can not be established, its better to go for a Confirmed LC. Other types of LC’s are practiced based on the requirement of Importer and Exporters in Trade. LC can have a combination of types of LC together too and i.e. Why LC is the most flexible instrument used in Domestic and International Trade.
What Importer (Applicant) should do before opening LC:
What Exporter (Beneficiary) should do on receipt of LC:
What is the future of LC in view of E-Banking and Online business/trade:
Though most of the business is overtaken by online operators, the need for LC shall continue at least for next 25 years. In order to get well worsed with LC, I suggest all to read articles UCP 600 of ICC, Paris and practice with various types of LC, rights & responsibilities of the LC Issuing Bank, Advising Bank, Negotiating Bank, applicant, Beneficiary & Confirming/Re-mbursing/Transferring banks etc in usage.
Nijay Gupta
Founder & CEO NK GUPTA Consulting
Booklet “Treasury for Non Treasurers” developed jointly with the Hogeschool Utrecht
| 09-10-2018 | treasuryXL |
All active in corporate treasury regularly get the question what his/her job is about. For laymen, treasury seems complex, magical, elusive. I assume that this is recognizable to many in the field. Providing a compact, clear explanation is no easy task. This gave us the idea to create a booklet “treasury for non treasurers” and make this available through various channels. Our objective in this in three lines is:
A well-structured, compact text that laymen offers an introduction to corporate treasury. This will be printed in a handy booklet, will be downloadable as a PDF and will be published in sections on www.treasuryXL.com in a blog form.
The students of the University of Applied Sciences Utrecht who, obtain the Minor Treasury Management, will write the chapters, divided over various themes that cover treasury as well as possible. The students will be supervised by people from the field. The production of the booklet will be managed by the community manager of treasuryXL. Editorial support will be provided by the Hogeschool Utrecht. The blogs and PDF’s will be published on the website of treasuryXL.
The booklet can be sponsored by companies that are product and/or service providers to the corporate treasury community. Both treasuryXL and Treasurer Search already stepped to the plate. The sponsors will carry the out-of-pocket expenses for the production of the booklet, mainly printing. In return they will receive a number of copies. The expected costs for one booklet are estimated at €1,-.
The supervisors will be field experts with an interest in helping young students. They can be independent, but also employees of the above mentioned sponsors. They are expected to have two (telephone) meetings with one or two students and comment on their input, being blogs / chapters.
Please let us know if you are interested in becoming a supervisor and/or sponsor. We look forward working with you,
Roy Baaten
Community Manager
[email protected] / (06) 21 30 37 44
Treasurer Test development: huge investment, great result!
| 03-10-2018 | by treasuryXL |
It all started a few years ago. The desire to better assess corporate treasurers led to a group of us wanting to build a test that did not exist yet. Together with various experts we invested time, money and expertise.
First, a project team was put together and Merel van Geel was appointed project leader. Other team members have a background in education, science, corporate treasury, assessment psychology, IT and treasury recruitment. Quite a diverse group! The goal of this project group was to investigate whether the concept could lead to a feasible business plan.
We quickly found that the cost of the software and its customization plays a vital role in this plan. The software should be able to test both personality as well as treasury knowledge, be able to work with various peer groups, include sound statistical research methods and generate reports. It should have a client friendly interface. In a few months, many systems were tested and demos have been viewed. After long consideration and negotiations, a software manufacturer was chosen that already developed tests and could be integrated into our treasuryXL existing software. This manufacturer has many universities and other research institutes as their client.
In parallel various personality models were considered. As the Big Five model is widely accepted, well known and, different from many others, accepted in academic circles, that is the model we chose. The Big Five assessment that is integrated in the Treasurer Test is offered by other parties separately and integrated in our solution. In other blogs we will elaborate on the model.
A team of experts from the Hogeschool Utrecht and the Vrije Universiteit took it upon them to develop a library of questions in various treasury sub categories and complexity level. The Test holds a lot more questions than the average candidate will answer.
Integration of various components was led by Merel and the results were screened by an advisory board that, together with a group of close friends were the first ones to do the Test for the first time. In parallel, we started to expand the treasuryXL website so that the test could be integrated and you can place and pay your order. Components such as a logo and a GDPR privacy statement were developed. Finally, the report of the Treasurer Test was designed, developed from the various above described components..
At this moment we are further testing the results. A selection of testee candidates has been made to fill the peer groups which are essential in the concept of the Treasurer Test. After the test has been made by these persons and feedback has been processed, the test will become available. We are very excited about this and will keep you up-to-date!
[button url=”https://www.treasuryxl.com/community/experts/roy-baaten/” text=”View expert profile” size=”small” type=”primary” icon=”” external=”1″]
[separator type=”” size=”” icon=””]