Confirmed letter of credit

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Confirmed Letter of Credit is a specific type of letter of credit. It can be used if seller considers creditworthiness of bank as questionable. In that case he can ask borrower for another guarantee from another bank. After the second bank backs the letter of credit it can be called confirmed one.

The process of obtaining confirmed (in practice: second) letter of credit is the same as in case of the first one. It is necessary to ask another bank for such a document.

Bank takes confirmation fee which size can differ based on: credit amount, duration, country, standing of first bank.

When is it necessary

Usually confirmed letter of credit is used in trade between countries. The first letter is released by bank in country of importer and the second one in country of exporter. It can be easier if the bank has branches in both countries.

References

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