Contact Us
Sign In / Sign Up for FREE
Go to advanced search...

Bank Regulations and Letter of Credit - Term Paper Example

Comments (0) Cite this document
The author of the paper will discuss the statement that banks deal with documents and not with goods, services or performance to which the documents may relate. Bank regulations are examples of commercial laws that have received a considerable amount of attention in recent times…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER91.6% of users find it useful
Bank Regulations and Letter of Credit
Read Text Preview

Extract of sample "Bank Regulations and Letter of Credit"

Download file to see previous pages However, international sales can be affected by a number of risks, such as payment issues. In this risk, the seller wants to collect the money right after shipping the cargo; otherwise, the buyer would wish to delay payment until the cargo arrives at its destination. Further risks are the economic climate in both the importing and exporting countries and the political stability of the countries, which affects the sale transaction and the degree of trust and confidence of each party in the other. As a result, banking regulations serve to lower or alleviate the risks that banks are exposed to and any disruptions and interruptions emanating from adverse economic and banking conditions. Additionally, banking regulations reduce the criminal risks to which banks are exposed, not to mention promoting and ensuring the confidentiality of banks.
To reduce risks in international sales, in terms of the payment issue, the seller and buyer usually agree to settle through letters of credit. This essay seeks to explore Article 5 of the Uniform Customs and Practice for Documentary Credits (UCP 600) 2007, which reads as follows: “Banks deal with documents and not with goods, services or performance to which the documents may relate”. In fact, this Article is usually explored in regard to the letters of credit principles. Thereby, in the first part of this essay, the concept of letters of credit in the light of the UCP 600 will be revealed. Subsequently to that, the principles of letters of credit, which are autonomous and conform to strict compliance, will be discussed in the light of relevant cases. Finally, the way that fraud affects letters of credit will be examined in the light of relevant cases.
1. Letter of Credit and the UCP
The importance of letters of credit to the current commercial society is evidenced by the many rules established to regulate and control its usage. These rules are called the Uniform Customs and Practice of Documentary Credits (UCP), which were created by the International Chamber of Commerce (ICC). Several commentators tend to accept this unification, such as Royston Goode, who describes it as “the most successful harmonizing measure in the history of international commerce”. In fact, the first version of these rules was drafted by the ICC in 1929. The rules were revised many times until the last version, UCP 600, was issued in 2007 and came into force on 1 July, 2007.7 Even though the UCP 600 regulates letters of credit, the legal status of these rules will not be considered binding until they are incorporated into the two parties’ contract, as it is mentioned in Article 1 of the UCP 600.
Letters of credit, which are also known as documentary credit or banker’s commercial credit, is defined in Article 2 of the UCP 600 as “any arrangement, however, named or described, that is irrevocable and thereby constitutes a definite undertaking of the issuing bank to honor a complying presentation”. According to this definition, a letter of credit has two characteristics.  ...Download file to see next pages Read More
Cite this document
  • APA
  • MLA
(“Banks Deal with Documents and Not with Goods, Services or Performance Essay”, n.d.)
Banks Deal with Documents and Not with Goods, Services or Performance Essay. Retrieved from
(Banks Deal With Documents and Not With Goods, Services or Performance Essay)
Banks Deal With Documents and Not With Goods, Services or Performance Essay.
“Banks Deal With Documents and Not With Goods, Services or Performance Essay”, n.d.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Bank Regulations and Letter of Credit

Treasury Management at Halifax Bank of Scotland and GlaxoSmithKline

When the business enterprise approaches a financial institution for obtaining the credit facilities, the enterprise is required to submit some important financial statements (profit and loss account, balance sheet etc.) and any further information relating to its activity. The financial statement of a company is prepared by qualified persons in terms of the relevant statutes. It may arise in anyone’s mind, that, when such is the case, is it not redundancy for another person to analyze the same. The answer to this is, financial statements are generally prepared to cater to the needs of the shareholders and/or the government. The relevant law mandates that the compilation/presentation of a financial statement is primarily focu...
11 Pages (2750 words) Report

Consumer Credit Act 2006

The key provisions are set to be implemented by October 2008 and the focus of this analysis is to critically evaluate the impact of the Act vis-à-vis consumer protection. Consumer Minister Ian Macartney asserted that “The Consumer Credit Act beefs up protection for borrowers, especially those with debt problems. It helps them challenge unfairness and protects them from dishonest lenders who try to rip them off. Our aim is a market that protects all consumers and is fair to honest lenders, leaving those without scruples nowhere to hide”. Whilst this meritorious objective of the Act is unequivocal, it is submitted at the outset that the efficacy of the provisions will inherently be reliant on proactive enforcement...
15 Pages (3750 words) Assignment

The Difference between Prudential and Protective Regulations

Governments attempt to regulate and organize different fields of life in their respective countries. This need for regulation has been created for a number of reasons. One prominent reason may be attributed to the fact that the government may assess a certain industry having a significant impact on the economy thereby embarking on a regulation endeavor. By these regulations, the government will be able to protect its markets from failure, leading to unwanted deficiencies such as monopoly, windfall profits, anti-competitive behavior, and predatory pricing.

One of the most important types of regulations that endeavor to protect consumers and restore confidence in the financial markets as being genuine is the regulation...

9 Pages (2250 words) Research Paper

Managing Emerging Technologies: The World Bank Group

information Technology helps the businesses in cutting costs and creating value to the organization as a whole, by minimizing the digital divide. This helps in developing new and effective business processes as well as in making value propositions especially in the new and modern corporate world whose business network is spread far and wide, such as the World Bank for instance. Information technology plays a vital role in integrating systems and strengthening the strategic ties between service providers and customers, thereby rendering effective services.
The World Bank is involved in various activities providing a wide range of services to several developing and in transition countries across the globe. The bank, owned, fina...
11 Pages (2750 words) Case Study

Credit Crunch in the UK

To sell more profitable subprime mortgages, mortgage companies bundled the debt into consolidation packages and sold the debt on to other finance companies. In other words, mortgage companies borrowed to be able to lend mortgages. For example, the lending was not financed out of saving accounts (Mortgage Guide).

These mortgage debts were bought by financial intermediaries. The idea was to spread the risk, but, actually, it just spread the problem. Usually, subprime mortgages would have a high-risk assessment rating. But, when the mortgage bundles got passed onto other lenders, rating agencies gave these risky subprime mortgages a low risk rating. Therefore, the financial system denied the extent of risk in their balance...
8 Pages (2000 words) Case Study

Human Resource As Proactive Human Capital: World Bank

Since employees are the pillar of the organization, the role of human resource management becomes crucial in the employment of its workforce. In the emerging challenges of the changing business equations, when the labor deployment is undergoing quantitative and qualitative transformations, HR strategy needs to be redefined to create versatility and flexibility of the contemporary work environment.

Access to information is a vital part of organizational management processes as it not only promotes efficiency and knowledge-based discharge of duties by the employees but it a great tool for the management to exploit the available information to improve its performance. The information provides wide-ranging knowledge about t...
12 Pages (3000 words) Case Study

Impact of Motivational Factors upon Employees at Bank AlFalah and Standard Chartered Pakistan

The impacts of these policies upon the employees of the banks will be studied with the help of the responses of the employees of both of the banks. The proposed research study will present the case studies of these two banks by employing a qualitative research approach. The data and information for the study will be collected through secondary and primary resources i.e. through literature review and in-depth interviews of the employees of both the banks. The study will help in the identification of the major strengths and weaknesses present in the motivational policies of these banks and will allow proposing the formulation of improved policies.

Motivation basically refers to satisfying one’s needs through differe...
14 Pages (3500 words) Research Proposal

Transatlantic Dispute over GMO Regulations

There has in the past been a row over the regulations of Genetically Modified Organisms (GMO) or Genetically Engineered Organisms (GEO), where different factors have been quoted by different stakeholders. The most notable of the stakeholders have been United States, Canada, and Argentina, which have brought about consultations aimed at straightening the disputes, with the European Community (EU), under the auspices of the World Trade Organization (WTO), and in respect to the “Moratorium for Regulations and Approval of Biotech Products” (Pipe SW 2008, pg 11). Based on the fact that the whole issue of GMOs rotates around a process where an organism has its genetic material altered using genetic techniques is in itself a...
6 Pages (1500 words) Coursework

Evaluation of Performance of a Bank Using Published Accounting Data

...Table of Content Introduction: 2 Background 3 Thesis ment 4 Main Body 4 Conclusion 6 Limitations 7 Recommendations 7 Bibliography 8 Evaluation of Performance of a Bank Using Published Accounting Data Introduction: Banks are the global industrial powerhouses1 and they have introduced very complex and risky products and services. During its operation, every bank is exposed to credit risk, liquidity problems, interest risk, market risk, operational and management risk.2 The collapse of banking industry severely influences the world financial system, which means that it is very important to evaluate the performance of the banks. There are different parameters based on which performance of a bank can be evaluated such as financial management...
7 Pages (1750 words) Case Study

Royal Bank of Scotland

The bank provides personal and business banking, corporate finance, insurance, and private banking. Though the bank is based in Edinburgh, it operates globally (The Royal Bank of Scotland Group plc and London, 2009, Para 1).
The Approach of The Royal Bank of Scotland: The Royal Bank of Scotland has set some goals in which it is very clear. It commits to helping its customers in raising funds, managing risks and investing in successful plans. Its trust in its people’s creativity and skills has paved a way for this organization that goes to success only. The organization’s goal is to explore the best market opportunities for its customers. It is committed to improving the current methods of financing and concentrati...
6 Pages (1500 words) Assignment
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Term Paper on topic Bank Regulations and Letter of Credit for FREE!

Contact Us