The method preferred by the exporter for a letter of credit issued by a foreign bank guaranteeing payment of a supply is that said L/C is both irrevocable and confirmed.

Sometimes the L/C is not confirmed for the following reasons:

• the issuing bank has not requested as such;
• the advising bank, which has received the mandate to confirm from the issuer, has no availability on its own book.

In the aforesaid cases, it is therefore advisable to obtain a payment guarantee which makes it possible to reduce the risks:

• of insolvency of the issuing bank (trade risk);
• of non-transferability of the funds at the time the credit matures (political risk);
• of insolvency of the debtor country;
• of embargo or other political events, which prevent the country and consequently the banks operating therein to honour the debt.

By means of this procedure, known as “silent confirmation”, an international bank guarantees the transaction separately from the L/C, directly guaranteeing the beneficiary of the L/C in the event of non-payment by the importer’s bank, against the positive negotiation of the documents.

NB: “R&M”, with its precise knowledge of the financial market and banking world, takes steps to find the international bank which will issue the “silent confirmation” so as to facilitate the Italian exporter in finalising the transaction.