DESCRIPTION OF STANDBY LETTERS OF CREDIT (SBLCS)
PROCEDURES TO PURCHASE SBLCS
- Buyer must have a minimum of 44 Euros/USD in an account OR AN ACTIVE CREDIT FACILITY with a minimum of 44M Euros/USD in a top 20 bank (preferably banks located in Western Europe; UK; Canada; USA; Singapore; Hong Kong)
- Buyer submits the following Compliance documents:
A) Client Information Sheet (CIS) – needs to include the name and address of the Buying Entity and the Buyer’s transacting bank/location (i.e., HSBC London) and the contact information of the person designated to represent the Buying Entity
B) Bank Confirmation Letter – The Buyer’s bank officer addresses and e-mails an attached Bank Confirmation Letter to the Buyer and cc’s the Provider’s secure e-mail address (which will be provided) The Bank Confirmation Letter (to be signed by two bank officers) will state that the Buyer’s account is in good standing and that there is 44M Euros/USD in the account OR (if the Buyer is using a credit facility to purchase the SBLCs) that the Buyer’s credit facility is a) active b) fully collateralized and c) that the Buyer has access to a minimum of 44M Euros/USD from the credit facility)
- Provider will verify the bank officer’s IP address – no contact is made with the Buyer’s bank. (NOTE: the IP Address verification is completed within two hours of the Provider receiving the BCL/ bank officer e-mail.) Once the IP address is verified the Provider will contact the Buyer immediately to arrange the purchase/ delivery of the SBLCs and a contract.
- Provider purchases the SBLCs (the SBLCs are available for delivery within 24-48 hours)
NOTE #1: THE BUYER DOES NOT SIGN A CONTRACT UNTIL THE SBLCS HAVE BEEN PURCHASED BY THE PROVIDER AND ARE IN CUSTODY (IN THE BUYER’S NAME) READY FOR DELIVERY
NOTE#2: THE PROVIDER PURCHASES THE SBLCS IN THE BUYER’S NAME
- Provider will contact the Buyer to confirm that the SBLCs have been purchased and are in custody and ready for delivery. The Provider will then provide the Contract to the Buyer for signature.
- Upon receiving the signed Contract from the Buyer, the Provider will disclose the Provider custodial account details and the contact information of the custodial bank officer. Buyer’s bank officer can then contact the custodial bank officer via telephone and/or e-mail and/or send a MT799 SWIFT Request for Confirmation that the SBLCs are in custody and have been purchased in the Buyer’s name.
IMPORTANT NOTE: THE FOLLOWING PROCEDURES APPLY IF THE BUYER AND PROVIDER ARE TRANSACTING OUT OF SEPARATE BANKS. IF THE BUYER HAS FUNDS IN HSBC LONDON; BARCLAYS BANK LONDON; OR DBS SINGAPORE THE TRANSACTION IS COMPLETED INTERNALLY / LEDGER TO LEDGER.
- Buyer’s bank sends a MT-799 Request for Confirmation to the Provider’s bank requesting an MT-799 RWA confirming that the SBLCs have been purchased in the Buyer’s name and are in custody at the Provider’s bank and available for purchase/delivery.
- Provider’s bank replies with an MT-799 SWIFT Confirmation with full bank responsibility that the SBLCs have been purchased in the Buyer’s name (the Buyer’s Contract number will be referenced in the MT-799 Confirmation) and are in custody at the Provider’s bank and ready for purchase and delivery and that upon receipt of the MT-103 SWIFT payment the SBLCs will be delivered immediately via MT-760 SWIFT into the Buyer’s account.
- NOTE: The Buyer does not send the MT-103 payment until he receives confirmation from his bank officer that he has confirmed bank-to-bank with full bank responsibility that the Provider’s bank will deliver the SBLCs as stated in the MT-799 Confirmation SWIFT.