Bank Letter Of Credit Policy
An insurance policy that allows U.S. banks to confirm letters of credit issued by foreign financial institutions, facilitating the purchase of domestic exports. The policy was established by the Export-Import Bank of the United States and insures the domestic bank against the possible default of the foreign institution. Investopedia Says:
Remember, banks take on additional risk when dealing in overseas transactions. Political risk, such as warfare or government intervention, can wipe out a borrower's ability to reimburse the bank. Furthermore, in smaller, less stable nations, foreign exchange risk can be very large. The policy protects banks against any inconvertibility arising from foreign exchange issues. Related Terms:
Currency Convertibility
Default Risk
Export
Export-Import Bank Of The United States - Ex-Im Bank
Foreign-Exchange Risk
Political Risk |