Operations insurance

Securing the transactions

with the commercial partners

Reliable and safe services

due to the BRD team of professionals and its extended network of banking correspondents in over 80 countries

 

The stand-by letter of credit is a bank guarantee issued in the form of a letter of credit, to guarantee the performance of a contractual obligation. The issuing bank undertakes to indemnify the beneficiary for any failure of the ordering party of meeting its obligations under the contract.

If you are an importer, the money retention stand-by letter of credit ensures that the down payment is returned by the exporter in case of failure under the contractual obligations.
If you are an exporter, the payment stand-by letter of credit guarantees the payment of the equivalent value of the delivered merchandise / services, if the importer does not pay.

 

How does the stand-by letter of credit work?

Step 1. The partners agree by contract on the terms of the operations and establish as means of payment the stand-by letter of credit.
Step 2. At the request of the ordering party, its bank (the issuing bank) opens the documentary letter of credit to the benefit its commercial partner (beneficiary), according to the conditions of the contract signed with the latter The issuing bank sends the text of the stand-by letter of credit to the correspondent bank in the exporter’s country (the bank of the beneficiary).
Step 3. The correspondent bank notifies the beneficiary on the opening, to its benefit, of a stand-by letter of credit.
Step 4. If the ordering party does not meet its contractual obligations, the beneficiary presents to the correspondent bank all the documents stipulated upon the opening of the stand-by letter of credit and demands that payment be made. After checking the documents, the correspondent bank sends them to the issuing bank for payment. The issuing bank makes the payment and debits the account of the ordering party.

 

The letters of credit provided by the bank are:

- Irrevocable letter of credit – which covers against commercial risks
- Confirmed letter of credit – which, in addition to covering the commercial risks, also covers the risk of insolvency of the issuing bank and the country risks – political and transfer, if the corresponding bank is in another country than the issuing bank.

Documentary credit

 

Securing

the commitments from the international commercial contracts

Reliable and safe services

due to the BRD team of professionals and its extended network of banking correspondents in over 80 countries

If the company operates in the field of export or import, contracting a documentary credit helps improving the commercial relations with the foreign partners.

For importers, BRD will ensure: the receipt of merchandise and/or the delivery of services according to the documents required under the documentary credit.
For exporters, BRD will guarantee: the collection of the equivalent value of the delivered merchandise and/or services according to the documents required under the documentary credit.

 

How does the documentary credit work?

Step 1. The buyer (importer) and the seller (exporter) perform the commercial operation by agreeing in the contract on the terms of the operation and by establishing as means of payment the documentary credit.
Step 2. At the request of the importer (ordering party), its bank (the issuing bank) opens the documentary credit in the favor of the exporter (beneficiary), according to the conditions of the commercial contract. The issuing bank sends the text of the documentary credit to the correspondent bank in the exporter’s country (the bank of the beneficiary).
Step 3. The correspondent bank endorses the opening of the documentary credit for the exporter.
Step 4. The exporter sends the merchandise to the importer and presents to its bank all the delivery documents specified in the documentary credit.
Step 5. The correspondent bank checks the documents and makes the payment (if it is a paying or confirming bank) or sends the payment documents to the issuing bank.
Step 6. The correspondent bank sends the documents to the issuing bank.
Step 7. The issuing bank checks the documents and makes the payment (or repays the paying bank) and delivers the documents to the importer against payment.
Step 8. The importer, based on the documents received from the bank, gets the customs clearance and accepts the merchandise.

What is the documentary credit?
The documentary credit is a payment commitment against documents, undertaken by the bank, for the proper development of the company’s relation with third parties. The parties involved in the ongoing execution of a documentary credit are: the ordering party, the issuing bank, the beneficiary’s bank and the beneficiary.


Types of documentary credit
The letters of credit provided by the bank are:

- Irrevocable letter of credit – which covers against commercial risks
- Confirmed irrevocable letter of credit – which, in addition to covering  the commercial risks, also covers the risk of insolvency of the issuing bank and the country risks – political and transfer, if the corresponding bank is in another country than the issuing bank.


Types of payment under a documentary credit
You can choose from the following types of payment, depending on the contractual provisions between the company and the commercial correspondent: at sight, at term, by acceptance or by negotiation.

International Letters of Guarantee

 

Guaranteeing

the meeting of obligations towards contractual partners (clients, suppliers)

Correlating the validity

of the guarantee with the terms of the contract signed with third parties

 

The guarantee letters issued by BRD are a proof of reliability for your business partners abroad.
The international letters of guarantee are the ideal solution for your business if the company participates in an international call for tenders or a foreign partner requests a performance bond. 

 

The bank provides the following types of guarantees:

- Bid bond
- Advance payment guarantee
- Performance bond
- Payment bond


How are the letters issued?

These guarantee letters are issued individually or under guarantee ceilings, if the requests for guarantee are multiple and recurrent.
Letters may be issued on paper or through the SWIFT Channel, in lei or in foreign currency.
The validity of a guarantee is correlated to the contractual provisions between the company and the partner.
The guarantees requested upon the issue of the bank guarantee letters may be deposits, mortgages on movable and immovable assets, guarantees issued by guarantee funds, etc.

Frequent questions

Can a client request the issuance of several letters?
Yes, depending on the specificity of the company's business, we can issue bank guarantee letters individually or under ceilings.

Is there a list of correspondent banks?
Yes, you may find below the list of correspondent banks, as well as certain documents that are useful for the company’s international relationships.

Correspondent banks list download
Anti-money laundering questionnaire download
Patriot Act download