Chapter 6

专业 PPT/ 商演示设计制作

Payment Methods

- Bank guarantee and standby credit

Review

Question 1 :Question 1 :

What’s the meaning of letter of credit? Question 2 :Question 2 :

Types of letter of credit ?

Question 3 :Question 3 : Advantages and risks under L/C

Why we need the bank guarantee ?

In the international trade and financial transaction

Buyer

Seller

Banker

Please provide security for my performance of contract to buyer !

Please provide security for my payment to seller !

Banker’s guarantee

What is the bank guarantee?

A bank guarantee is a written promise issued by a

bank at the request of its customer, undertaking to

make payment to the beneficiary within the limits of a

stated sum of money in the event of default by

principal.

Basic parties to a bank guarantee

Applicant -- the party that requests a bank to issue a bank guarantee. Beneficiary -- the party in whose favor a bank guarantee is opened and who

has the right to claim for compensation in accordance with the terms and conditions of the guarantee

guarantor -- the bank that issues a letter of guarantee at the re4quest of tis

customer. Advising or transmitting bank -- a bank in the beneficiary’s place that notifies or transmits the

guarantee to the beneficiary.

Flow chart of direct guarantee

Applicant

Guarantor

Beneficiary

Transmittingbank

application

issue

notify

Claims for payment

Claims for reimbursement

Underlying contract

Procedure of direct guarantee

The applicant applies for the opening of an L/G application or agreement ； evaluation of related transaction or project ； collateral or counter guarantee The guarantor bank issues a L/G ： direct /indirect Claims and payments The guarantor bank claims for reimbursement from the applicant and the counter guarantor Cancellation of a L/G

Preview

Think about the difference between L/C and L/G?Think about the difference between L/C and L/G?

Types of guarntees

Bid Bond -- Seller bids with L/G promising not to withdraw tender before adjudication (opening sealed tender), to accept contract awarded if winning bid, to replace bid bond with performance bond after awarded contract.failing which, Guarantee Bank would pay a penalty to tender inviter ranging from 2% ~ 5% of contract value

Performance guarantee -- The guarantor undertakes to make payment to the beneficiarywithin the limit of a stated sum of money in the event of default bythe supplier or the contractor in due performance of the terms of

a contract between the principal and the beneficiary.

Types of Guarantee

Advance payment Bond

-- The guaranteed amount is the amount of the advancepayment, which is, as a rule, automatically and proportionally reduced following each shipment, or reduced as work proceeds.

What kind of risk will be faced by bank under banWhat kind of risk will be faced by bank under bank guarantee? k guarantee?

What is a standby letter of credit

Standby letter of credit means an issuer on behalf of an applicant that represents an obligation to the beneficiary, pursuant to a complying presentation: -- to repay money borrowed by, advanced to, for the account of the applicant; or -- to make payment on account of any indebtedness undertaken by the applicant ； or -- to make payment on account of any default by the

applicant in the performance of an obligation.

Flow chart of a standby L/C

IssuingBank

Standby LC can be sight / acceptancepayment or negotiation. It can be confirmed at the request ofIssuing Bank.

Advising Bank

Advise

Seller or Buyer

Beneficiary

Payment / acceptance or negotiation is conditional upon: -the presentation of stipulated documents-provided that the terms and conditions ofcredit are complied with.

Types of standby LC:-performance Standby, - advance Payment standby-Bid Bond / Tender Bond Standby, - Counter Standby-Financial Standby, - Insurance Standby-Commercial Standby - Direct Pay Standby

Apply

Buyer or Seller

Applicant

Types of a standby L/C

Performance Standby

Advance Payment  Standby

Bid Bond/Tender Bond Standby

Counter Standby

Financial Standby

Direct Pay Standby

Insurance  Standby

Commercial Standby

Difference Between L/G and Standby Credit

• Only at sight and can not be negotiated

• Accessory guarantee and independent guarantee

• At sight or at tenor and ca

n be negotiated

• Only independent guarantee

Similarity:• based on banker’s credit standing, pay against stipulated documents• Bankers take primary liability in the payment• Documents requirements are simple• Separate from underlying contracts

Bank Guarantee Standby Credit

Preview

Compare the differences among L/C, L/G and Compare the differences among L/C, L/G and

Standby L/C?Standby L/C?

Think about the importance of documents in Think about the importance of documents in

settlement?settlement?

Thank You