Suchergebnisse

Letters of Credit (Ls/C), the most common form of financing international commerce, have been a major source of worry for the whole international business world in recent years due to Ls/C fraud. Every year, the parties to the LS/C transaction lose billions of dollars due to fraud. A variety of reasons have led to the proliferation of such frauds. Many of them include the exclusive use of paper in international commerce, geographical distance in international trade, containerization, the usage of discounted Ls/C, and the absence of prosecution. Many academics and legal experts have been hesitant to interfere in Letter of Credit (Ls/C) transactions and have criticized local government regulations all around the globe. Allowing the courts to intervene with bankers' guarantees, according to government officials, may risk its integrity and make it more costly and ineffective than required. Due to a lack of regulation, recent research indicates that relevant organizations take certain measures to prevent Ls/C fraud, such as verifying the seller's reputation via well-known transportation services. Shipping, pre-shipment inspections, performance bonds, and electronic trade papers are all part of the process.

In the long history of international trade the main points of friction have been assurance of payment for the seller and assurance of delivery for the buyer. Where there is business to be done, traders have, over the centuries, usually found ways and means. From their practices have evolved the familiar modern lubricants for these friction points, letters of credit (which will be referred to hereafter as "credits"), insurance contracts, bills of lading, and the inspection services offered by various private and governmental agencies. The credit in the form we now know it developed during the nineteenth century and is a most efficient solution for the seller's problem. Its practical importance in international commerce can hardly be overstated. It is both the servant of such trade, and a stimulus to it. No better example of its use and value in the movement of goods across international boundaries is to be found than in the commerce between Japan and the United States. Japan imported American goods worth one billion seven hundred million dollars during 1962. In the same period the United States imported Japanese goods worth one billion dollars. It is estimated that ninety-five per cent of this tremendous flow of goods moved under credits. The volume of the import-export business varies from year to year. The percentage affected by credits remains fairly constant.

Bank exposure to off‐balance sheet activities in general and Standby Letters of Credit (SLCs) in particular has become a major concern to regulators. The risk‐exposure of SLCs has been re‐examined by employing option pricing methodologies to calculate implied asset risk from bank equity and flat deposit insurance, and from risk‐premia on bank subordinated debt. The results indicate that SLC reduce systematic risk, equity risk, and implied asset risk. It appears that Standby Letters of Credit contribute to the overall diversification of bank's assets.