Confirmed Letter of Credit


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Confirmed Letter of Credit

A letter of credit which a bank other than the bank that opened it agrees to honor as though they had themselves issued it. This additional confirmation is in addition to the obligation of the bank which issued the letter of credit.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Confirmed Letter of Credit

A letter of credit guaranteed by two banks. That is, a bank agrees to honor the letter of credit and make the required payment in case both the letter's holder and the original, issuing bank both fail to make payment. This reduces the risk of the letter of credit to an absolute minimum.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
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For example, suppose you have two transactions, both valued at $15,000, one of which is secured through a confirmed letter of credit and the other through a factor.
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What one needs to keep in mind, though, is that many of these banks require their customers to put up 100% cash collateral, so that a confirmed letter of credit is, in these instances, really only prepayment by the customer, with a steep bank fee added.
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Having a confirmed letter of credit does not mean that you are immune from discrepancies.
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