A Bank Payment Obligation (BPO) is an agreement where a buyer's bank agrees to pay the seller's bank upon presentation of data showing the seller met the terms of the purchase contract. The buyer and seller provide their banks with the required data terms. Their banks upload this to a Transaction Matching Application which establishes a baseline. When the seller submits shipment data and it matches the baseline, the buyer's bank is obligated to pay the seller's bank, who then pays the seller.
Animated flow diagrams illustrating how back-to-back letters of credit work. Part of a series on structures for mitigating risk in international trade and financing export sales. Extracted from training classes developed and conducted by Global Trade Risk Management Strategies LLC.
Animated flow diagrams illustrating how transferable commercial letters of credit work. Part of a series on structures for mitigating risk in international trade and financing export sales. Extracted from training classes developed and conducted by Global Trade Risk Management Strategies LLC.
LETTER OF CREDITS or LOCs are common in international trade. The concept of LOCs can be complicated. This ppt makes them easier to understand in the best possible simple language. LEARN, CREATE AND SHARE!!!
Animated flow diagrams illustrating how back-to-back letters of credit work. Part of a series on structures for mitigating risk in international trade and financing export sales. Extracted from training classes developed and conducted by Global Trade Risk Management Strategies LLC.
Animated flow diagrams illustrating how transferable commercial letters of credit work. Part of a series on structures for mitigating risk in international trade and financing export sales. Extracted from training classes developed and conducted by Global Trade Risk Management Strategies LLC.
LETTER OF CREDITS or LOCs are common in international trade. The concept of LOCs can be complicated. This ppt makes them easier to understand in the best possible simple language. LEARN, CREATE AND SHARE!!!
Letter of Credit / LC / Trade Law / What is LC, Letter of Credit/ How LC work...Asif Mohammad ALFAYED
1.What is Letter of Credit and how many Kinds of Letter of Credit are there?
2 . Critically analys The principles of letter of credit including how Letter of Credit Perform in Bangladesh?
Letter of Credit - Complete Presentation - (Bcom-Mcom-BBA-MBA-BS)Millat Afridi
A letter of credit (LC), also known as a documentary credit or bankers commercial credit, is a payment mechanism used in international trade to provide an economic guarantee from a creditworthy bank to an exporter of goods. A letter of credit is extremely common within international trade and goods delivery, where the reliability of contracting parties cannot be readily and easily determined. Its economic effect is to introduce a bank as underwriting the credit risk of the buyer paying the seller for goods.
What is a Letter of Credit?
Parties Involved in LC Transaction
Letter of Credit Process
Types of Letter of Credit
Documents of Letter of Credit
Advantages of Letter of Credit
Disadvantages of Letter of Credit
This shows short details about Letter of Credit, its types and procedures so that one can get necessary information regarding this spending just few minutes.
Letter of Credit / LC / Trade Law / What is LC, Letter of Credit/ How LC work...Asif Mohammad ALFAYED
1.What is Letter of Credit and how many Kinds of Letter of Credit are there?
2 . Critically analys The principles of letter of credit including how Letter of Credit Perform in Bangladesh?
Letter of Credit - Complete Presentation - (Bcom-Mcom-BBA-MBA-BS)Millat Afridi
A letter of credit (LC), also known as a documentary credit or bankers commercial credit, is a payment mechanism used in international trade to provide an economic guarantee from a creditworthy bank to an exporter of goods. A letter of credit is extremely common within international trade and goods delivery, where the reliability of contracting parties cannot be readily and easily determined. Its economic effect is to introduce a bank as underwriting the credit risk of the buyer paying the seller for goods.
What is a Letter of Credit?
Parties Involved in LC Transaction
Letter of Credit Process
Types of Letter of Credit
Documents of Letter of Credit
Advantages of Letter of Credit
Disadvantages of Letter of Credit
This shows short details about Letter of Credit, its types and procedures so that one can get necessary information regarding this spending just few minutes.
Standby Letter of Credit Definition, Issuance, Notification and usesOscarWason
Another prominent payment technique used in international trade is the Standby Letter of Credit. What is a Standby Letter of Credit (SBLC)? How is it different from a Documentary Letter of Credit? How do issuance and notification of a Standby Letter of Credit work? … Well This article provides the answers to these questions.
What is a Standby Letter of Credit (SBLC)?
The Standby Letter of Credit (SBLC) is a guarantee issued by the importer’s bank, in favor of the exporter, for an amount agreed at the signing of the commercial contract. It provides a guarantee to the exporter that, if due to any circumstances, the importer is unable to pay, then the bank
will make the payment.
Grand City Investment Limited
Email: apply@grandcityinvestment.com
Website: https://grandcityinvestment.com
New Practices and Opportunities in Supply Chain FinanceMisys
This presentation, for a Trade Innovation circle held in Istanbul, is about new practices and opportunities in Supply Chain Finance. Looking more specifically at the Bank Payment Obligation and technology innovations.
Trust Exchange and ICS Webinar on Cannabis Banking ComplianceTrust Exchange
Join Trust Exchange CEO Edward Sullivan and ICS SVP Ralf Kaiser for a discussion regarding the latest issues in cannabis compliance. ICS is the leader in legal cannabis banking, they provide legitimate financial services and solutions for marijuana businesses while reducing the risks and overhead associated with these high-risk accounts.
A home loan seeker should give complete details so that the process becomes easy. Also, this can create a positive opinion about you among the bankers.
The standard global practice of other countries, the credit information reports neither express any opinion about the borrower creditworthiness nor assign any rating to the borrowers.
Default Identification and Prevention of Frauds in International BusinessJIMS Rohini Sector 5
Expanding international business offers fantastic business opportunities for all-including fraudsters. Many times the default/fraud succeeds because of the unawareness of parties involved in the trade transaction. This unawareness can be on account of inherent weakness in a document involved in the transaction or may be due to myths related to a specific payment system as proposed by the counter party . For example, many exporters consider a letter of credit as a police to the commercial transaction which is not true .
It is therefore of ultimate importance for banks , traders and all other parties to be aware of associated risks, pitfalls and the red flags etc while handling the international trade transactions.
FIEO in association with JIMS, Rohini is organizing a one day workshop to impart knowledge on all dimensions of a trade transaction so as to be able to take necessary preventive precautions. Extensive coverage will be given on technical aspects of trade transactions, alternative possibilities , applicable rules , inherent strength or weakness of a particular type of document etc. The various topics covered in the workshop will be highlighted through case studies. It also covers further the legal and practical aspects; in particular the means of asset recovery post-fraud will be dealt with.
The workshop was led by Dr.(Prof.) Ashok Bhagat Ex. Head Sales – Trade&VP Societe Generale, ICC India nominee for ICC Banking Commission Paris –India Chapter & Ex-Officio Member ICC INDIA Executive Committee and currently Dean -IB , JIMS, Rohini. Delhi.
Understanding Your Credit Report and ScoreSpringboard
Information about what’s on a credit report, how it gets there, how a credit score is calculated, and how to develop good financial habits. Understanding credit and knowing where you stand are vital to protecting yourself from predatory lending by unqualified or unscrupulous lenders offering costly or unstable loan products.
1. How Bank Payment Obligations (BPOs)
Work
Global Trade Risk Management
Strategies LLC
2. 2
Global Trade Risk Management
Strategies LLC
How Bank Payment Obligations Work
Buyer
Contract
(Purchase Order)
Seller
A Bank Payment Obligation (“BPO”) is an engagement by a bank that is issued
pursuant to a trade transaction. The BPO is requested by the buyer and contains
the bank’s undertaking to pay the seller’s bank based on presentation by the
seller’s bank of data specified in the BPO. The intent is that the data evidence
compliance of the seller with the contract between the buyer and seller, so the
starting point is the execution of such contract. The contract should specify what
data the seller is required to submit in order to trigger the payment obligation.
3. 3
Global Trade Risk Management
Strategies LLC
How Bank Payment Obligations Work
Buyer
Contract
(Purchase Order)
Purchase
Order
Data
Seller’s Bank
Purchase
Order
Data
Buyer’s Bank
Seller
The buyer applies for a BPO and transmits to his bank the data requirements that are specified
in the contract. Simultaneously, the seller alerts his bank that it will be receiving a BPO and
also transmits to this bank the data requirements that are specified in the contract and expected
to be in the BPO.
4. 4
Global Trade Risk Management
Strategies LLC
How Bank Payment Obligations Work
Buyer
Contract
(Purchase Order)
Purchase
Order
Data
Seller’s Bank
Purchase
Order
Data
Buyer’s Bank
Seller
Baseline
Submission
w/ BPO
Baseline
Submission
Transaction
Matching
Application
At the core of the BPO concept is the use of a computerized system that performs data
matching. This “Transaction Matching Application” may be hosted by one of the banks or by a
third party. The banks agree on what TMA they will use and each uploads the data requirements
provided by its customer. The buyer’s bank further indicates that it engages to pay the seller’s
bank upon presentation to the TMA of data that comply with the data requirements.
5. 5
Global Trade Risk Management
Strategies LLC
How Bank Payment Obligations Work
Buyer
Contract
(Purchase Order)
Purchase
Order
Data
Seller’s Bank
Purchase
Order
Data
Buyer’s Bank
Baseline
Match
Report
Baseline
Match
Report
Seller
Baseline
Submission
w/ BPO
Baseline
Submission
Transaction
Matching
Application
The TMA compares the data requirements files submitted by the two banks against one another
and notifies both of any mismatches. If the data requirements match, both banks are notified
that a “baseline” has been established and that the buyer’s bank’s BPO is now in effect.
6. 6
Global Trade Risk Management
Strategies LLC
How Bank Payment Obligations Work
Buyer
Contract
(Purchase Order)
Purchase
Order
Data
Seller’s Bank
Purchase
Order
Data
Buyer’s Bank
Baseline
Match
Report
Baseline
Match
Report
Seller
Baseline
Submission
w/ BPO
Baseline
Submission
Transaction
Matching
Application
The BPO itself is in favor of the seller’s bank, so there is an expectation that the seller’s bank
will engage with the seller to provide some sort of service, but the Uniform Rules for BPOs do
not specify what type of engagement the seller’s bank may enter into with the seller. It may be
merely an agreement to receive and upload a data file or it may involve a commitment from the
seller’s bank to pay the seller upon submission of a compliant data set.
Engage-
ment
7. 7
Global Trade Risk Management
Strategies LLC
Goods
How Bank Payment Obligations Work
Buyer
Contract
(Purchase Order)
Purchase
Order
Data
Seller’s Bank
Purchase
Order
Data
Buyer’s Bank
Baseline
Match
Report
Baseline
Match
Report
Seller
Baseline
Submission
w/ BPO
Baseline
Submission
Transaction
Matching
Application
Based on the arrangements in place, the seller ships the goods that the buyer ordered.
Engage-
ment
8. 8
Global Trade Risk Management
Strategies LLC
Goods
Documents
How Bank Payment Obligations Work
Buyer
Contract
(Purchase Order)
Purchase
Order
Data
Seller’s Bank
Purchase
Order
Data
Buyer’s Bank
Baseline
Match
Report
Baseline
Match
Report
Seller
Baseline
Submission
w/ BPO
Baseline
Submission
Transaction
Matching
Application Engage-
ment
All of the documents—invoices, transport documents, etc.— are sent by the seller directly to the
buyer.
9. 9
Global Trade Risk Management
Strategies LLC
Goods
Documents
How Bank Payment Obligations Work
Buyer
Contract
(Purchase Order)
Shipment
Data Set
Purchase
Order
Data
Seller’s Bank
Purchase
Order
Data
Buyer’s Bank
Baseline
Match
Report
Baseline
Match
Report
Seller
Baseline
Submission
w/ BPO
Baseline
Submission
Transaction
Matching
Application
Shipment
Data
Engage-
ment
The seller submits data about the shipment and to his bank in the manner specified in the
bank’s engagement. The bank compiles the data into a data set and uploads it to the TMA to
compare with the requirements described in the “established baseline.”
10. 10
Global Trade Risk Management
Strategies LLC
Goods
Documents
How Bank Payment Obligations Work
Buyer
Contract
(Purchase Order)
Shipment
Data Set
Purchase
Order
Data
Seller’s Bank
Purchase
Order
Data
Buyer’s Bank
Baseline
Match
Report
Baseline
Match
Report
Seller
Data
Set
Match
Report
Data
Set
Match
Report
Baseline
Submission
w/ BPO
Baseline
Submission
Transaction
Matching
Application
Shipment
Data
Engage-
ment
The TMA notifies both banks of the results of the data matching process. If there are no
mismatches, the BPO is triggered and the buyer’s bank is obligated to pay. If there are
mismatches, the buyer’s bank may accept or reject them.
11. 11
Global Trade Risk Management
Strategies LLC
Goods
Documents
Payment
Payment
How Bank Payment Obligations Work
Buyer
Contract
(Purchase Order)
Shipment
Data Set
Purchase
Order
Data
Seller’s Bank
Purchase
Order
Data
Buyer’s Bank
Baseline
Match
Report
Baseline
Match
Report
Seller
Data
Set
Match
Report
Data
Set
Match
Report
Baseline
Submission
w/ BPO
Baseline
Submission
Transaction
Matching
Application
Shipment
Data
Engage-
ment
Payment takes place outside the BPO framework, by normal bank-to-bank means. Based on its
own engagement with the seller, the seller’s bank pays the seller.
12. 12
Global Trade Risk Management
Strategies LLC
Goods
Debit
Documents
Payment
Payment
How Bank Payment Obligations Work
Buyer
Contract
(Purchase Order)
Shipment
Data Set
Shipment
Data
Purchase
Order
Data
Seller’s Bank
Purchase
Order
Data
Buyer’s Bank
Baseline
Match
Report
Baseline
Match
Report
Seller
Data
Set
Match
Report
Data
Set
Match
Report
Baseline
Submission
w/ BPO
Baseline
Submission
Transaction
Matching
Application Engage-
ment
The buyer’s bank turns to the buyer for reimbursement of the payment.
13. This set of slides comes from training classes
developed and taught by
Global Trade Risk Management Strategies LLC.
For Information about upcoming seminars
and webinars, visit
http://www.gtrisk.com/Upcoming_Seminars.html.
Global Trade Risk Management
Strategies LLC
Credits