ISBP Publication 745<\/strong>) in force since 1 July 2013. <\/p>\n\n\n\nThere are many parties involved in documentary credit transactions, from the seller to the buyer and the banks involved (with different roles). The UCP600 rules clarify, in Art. 2 (under the heading \"Definitions\"), the classification of the subjects. In particular, among the other definitions in Art. 2, the following definitions stand out with regard to subjects:<\/p>\n\n\n\n
Ordering: <\/strong>means the party at whose request the credit is issued (Buyer)<\/strong>.
Beneficiary: <\/strong>means the party in whose favour the credit is issued (Seller)<\/strong>.
Issuing bank: <\/strong>means the bank that issues a credit at the request of an originator or for its own account.
Confirming bank: <\/strong>means the bank adding its confirmation to a claim upon authorisation or request by the issuing bank.
Designated Bank: <\/strong>means the bank at which the credit is usable, i.e. any bank in the case of a credit usable at any bank.<\/p>\n\n\n\nSince with documentary credit, the issuing bank commits itself to making payment against the presentation of compliant documents by the beneficiary, payment becomes free from the will of the debtor and, therefore, it can be said that documentary credit allows<\/strong>if well managed by the beneficiary, the elimination of commercial risk <\/strong>(insolvency of the debtor).<\/p>\n\n\n\nHowever, since the issuing bank is usually a bank in the same country as the borrower, if the borrower is in a country with high political risk, the loan remains subject to that risk category. Instead, in order to eliminate or at least limit political risk, one uses the institution of credit confirmation<\/strong> through which the seller obtains a further obligation, also independent, from another bank (confirming bank) which undertakes to honour the credit on the same terms as the credit originally issued by the issuing bank.<\/p>\n\n\n\nThe institution of confirmation<\/strong> assumes a fundamental importance for the operator, as it makes it possible to eliminate the risk of insolvency of the issuing bank (one thinks in this respect of the hypothesis that the originator's bank is not of high standing) and the political risk precisely because the beneficiary obtains the performance from the confirming bank after the latter has examined the documents, regardless of whether or not the latter is then reimbursed by the issuing bank. <\/p>\n\n\n\nThe credit, in order to be confirmed, must be issued as such directly by the issuing bank (usually in field 49 of the form swift<\/em> the words confirmed<\/em> or may add<\/em>).<\/p>\n\n\n\n<\/p>\n\n\n\n