A confirmed LC is a Bank Credit Letter where the payment guarantee of the seller or exporter is backed up by a second bank or a confirming bank. In simple words, in case if the first bank defaults to pay, then the payment will be covered by the second bank.

1. DIFFERENCE
BETWEEN
CONFIRMED AND
UNCONFIRMED
LETTER OF CREDIT
WWW.BANDENIACHALLENGERBANK.COM

2. WHAT IS A
CONFIRMED LETTER
OF CREDIT?
A confirmed LC is a Bank Credit Letter where the
payment guarantee of the seller or exporter is backed
up by a second bank or a confirming bank. In simple
words, in case if the first bank defaults to pay, then the
payment will be covered by the second bank. This type
of trade finance payment method is used by importers
and exporters in international trade where an
additional guarantee is provided to the original
documentary credit from a second bank. The borrowers
are required to apply for the confirmed LC if the seller is
not convinced about the creditworthiness of the issuing
bank of the original letter.

3. WHAT IS AN
UNCONFIRMED LC?
Contrary to unconfirmed LC, it refers to a documentary
credit where the exporters or sellers do not acquire any
additional or second guarantee from a second bank. It
means an unconfirmed LCs are those where there is
only a guarantee of payment by the original issuing
bank. Here the second bank involves only to act as an
intermediary and to help process a transaction. There is
no additional confirmation by the secondary bank.
Ensuring payment security is the most common reason
for acquiring a letter of credit services as a means of
payment in international transactions. Therefore, most
documentary credits are unconfirmed LCs.

4. DIFFERENCE BETWEEN
CONFIRMED AND
UNCONFIRMED LC
1. Cost
The cost of unconfirmed LC is less compared to confirm
LCs as there are no confirming bank charges applied
while the confirmed letters of credit are expensive due
to the charges.

5. DIFFERENCE BETWEEN
CONFIRMED AND
UNCONFIRMED LC
2. Main Institution
Under an unconfirmed LC, the original issuing bank is
the main institution that provides an irrevocable
payment guarantee to the exporter while a confirmed
LC not only contains an irrevocable guarantee from the
issuing bank but from the second bank also, known as a
confirming bank. Both payment undertakings are
separate from each other.

6. DIFFERENCE BETWEEN
CONFIRMED AND
UNCONFIRMED LC
3. Amendments
Only the beneficiary i.e. the seller is authorized to make
or request the changes in the unconfirmed LC via the
applicant while in case of a confirmed bank credit letter,
the second bank can also make changes or
amendments directly to the issuing bank.

7. DIFFERENCE BETWEEN
CONFIRMED AND
UNCONFIRMED LC
4. Process
The seller requests for the payment from the issuing
bank as the second bank only acts as a middleman
while in a confirmed LC, the seller first approaches the
confirming bank for the payment and when it is done, it
requests the payment from the issuing bank.

8. DIFFERENCE BETWEEN
CONFIRMED AND
UNCONFIRMED LC
5. Bank to check the
credibility
It is the issuing bank that checks the credibility of the
importer in an unconfirmed bank credit letter while in
case of a confirmed documentary credit, the confirming
bank does the task for the issuing bank.

9. About us
Creating Value with it's fast
and efficient Solutions
At Bandenia Challenger Bank, we are
committed to delivering trade and financing
solutions in the best interest of our
customers.
Carrying out smooth and efficient
transactions with diligence and efficacy has
been our driving force since day one. With a
structured support system, we have been
able to successfully help our clients in
growing their cash flow and capital.
We strongly adhere to our mission of
providing custom financial solutions to
complete their transactions effectively.

10. UK Address
Suite 23, Fifth Floor, 63/66
Hatton Garden,London,
EC1N 8LE, United Kingdom.
UAE Trade Desk
Suite 602, Sixth Floor,
Business Village, Block B,
Dubai, PO Box 5610, United
Arab Emirates.
www.bandeniachallengerbank.com

11. Thank You