What is Confirming Bank | What are the responsibilities and rights of the Confirming Bank |

What is Confirming Bank?
A letter of credit is an undertaking to pay the amount given by the LC issuing bank. However, sometimes foreign exporters seek additional assurance or guarantee from a third-party bank for payment. In this situation, when a third bank provides additional assurance for payment to the exporter in an LC, then that bank is called Confirming Bank.
What are the responsibilities of the Confirming Bank?
Documentary credits are currently issued under UCP-600 published by the ICC. Article 8 of this publication sets out the responsibilities and rights of the Confirming Bank. It is discussed below-
Add Confirmation is arranged under Agency Arrangement / Credit Line of 2 banks. The bank which agrees to impose Add Confirmation on the LC at the request of the Issuing Bank is called the Confirming Bank. Against this type of LC, the export bill is presented to the Confirming Bank or Nominated Bank for obtaining value.
If it appears on examination of the export bill presented by the beneficiary that it is a Complying Presentation, the Confirming Bank or any other Nominated Bank shall refrain from taking action as follows:
• If the loan is opened on a Sight basis, the payment will be immediate.
• If the loan is opened on a deferred basis, the presenting bank will inform the bill maturity date (Maturity /Due Date).
• If the L/C is opened on usance basis, the presenting bank will give acceptance.
• If the documents are presented to any other Nominated Bank and the Nominated Bank rejects it, the Confirming Bank will take action as applicable out of the above 3 measures.
• Since the Confirming Bank has already imposed its confirmation on the loan document, the Bank will be obliged to negotiate the bill or payment against the presented error-free documents.
• If any other Nominated Bank has already paid the amount against the export bill and raises a reimbursement claim with the Confirming Bank, then the Confirming Bank will be obliged to pay the amount against the said claim.
• If an LC Issuing Bank requests to impose LC Confirmation and the Confirming Bank is unable to do so, the inability shall be immediately reported to the LC Issuing Bank.
• If confirmation is imposed on the letter of credit on the request of the LC Issuing Bank and payment is made to the Negotiating/Nominated Bank as per the demand, the Confirming Bank has the right to collect the said amount from the Issuing or Requesting Bank.
• LC Issuing Bank shall specify in its request letter the confirmation charges/commission from whom the confirming bank reserves the right to collect the same.

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