Letters of Credit

Letters of credit are used to settle the payment obligation of a buyer. It is an irrevocable undertaking given by Doha Bank whereby we undertake to honour a complying presentation of documents submitted in accordance with the terms and conditions of the LC and UCP 600.

The applicant for a LC is the buyer that asks its bank to issue the LC. Further, the entities that are party to a LC are as follows:

Advising Bank: the bank through which the LC is transmitted by the issuing bank for advising to the beneficiary.
Beneficiary: the company to whom the LC is issued, in most cases the provider of the goods, services, or performance.
Issuing Bank: the bank acting for the applicant by issuing the LC on applicant’s behalf. The issuing bank gives an undertaking to reimburse a nominated bank that has honoured or negotiated compliant documents under the terms of the LC, even if the applicant is unwilling to pay.
Confirming Bank: a bank that adds its additional undertaking to that of the issuing bank and thereby undertakes to honour or negotiate a complying presentation made to it by the beneficiary. If a bank confirms LC, the LC is commonly known as a ‘Confirmed LC’.
Nominated Bank: a bank at whose ‘Counters’ a beneficiary may make a presentation of documents for negotiation. Each LC must indicate whether it is available with the issuing bank or with a nominated bank or with any bank (in which case, any bank is a nominated bank).

The advising, confirming and nominated bank may be the same institution.

The following are the types of LCS and other supporting products and solutions along with their risks:

	Applicable Products	Description	Key Risks (Non-Exhaustive)
Client Purchasing on LC Terms	Letter of Credit (LC) Issuance	Irrevocable undertaking to pay by Doha Bank as per terms of LC sight or Issuance.	Sight – In case of non-payment by applicant (Doha Bank client). Doha Bank will need to take possession of goods. Usance – Doha Bank depends on applicant to pay at maturity.
	LC Trust Receipts (TRS)	Import loans to settle payment under LC. Tenor depends on financials, inventory holding period and usance period already utilized under LCS. Maximum tenor allowed is 180 days including usance as per policy	Funded exposure on Doha Bank client. Doha Bank depends on client to pay at maturity. Even though goods are pledged favoring Doha Bank, this product remains high risk.
	Shipping Guarantees	Guarantee maybe issued favoring shipping line for early discharge of goods. High risk product only to be used for short voyages	Open ended guarantee with respect to validity and amount
	Structured Products	A. Export backed import finance structures B. Back to back letter of credit structures	Various risks involved. Please contact our (GTB team) Relationship Managers
Client Selling on LC Terms	Confirmation	Doha Bank assumes the risk of export LC issuing bank and country. Unfunded exposure. Dependency on availability of country and bank limits	While no exposure on CIBG client, Doha Bank remains at risk as Doha Bank has dependency on issuing bank to pay / FX availability / document checking capability. Other operations risk also involved
	Discounting Bills on Bank Risk	Purchase of accepted bill under LC. Funded exposure. Dependency on availability of country and bank limits	While no exposure on CIBG client, Doha Bank remains at risk as Doha Bank has dependency on issuing bank to pay
	Discounting Bills on Client Risk	Export bills under LC may be discounted on client risk	Funded exposure on Doha Bank client primary source of payment will be issuing bank.
	Transfer of LC	Transferable LCs may be transferred to suppliers of Doha Bank client	Operational Risk

Indicative Risk : NIL / MODERATE / HIGH / VERY HIGH

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Doha Bank’s retail, commercial and corporate products and services are granted at our sole discretion and are subject to the Bank’s terms, conditions and acceptance.