00:05
Later of credit is a document issued by a bad that guarantees payment to a seller on the terms of the letter of credit provided that the seller meets the condition specified in the letter of credit.
00:19
A letter of credit is a document issued by a band document is should buy a band that guarantees payment to a seller on the terms of the letter of credit on the terms of the letter of credit provided that the seller meets the condition provided that the seller meets the conditions specified in the letter of credit.
01:33
So in the scenario you describe the importer which is the your customer is located in indonesia and wants to purchase the good from a supplier located in california.
01:56
The importer asked the bank to provide a letter of credit to back the purchase.
02:02
The risk and the rewards involved from the bank's point of view are as follows.
02:10
So the risk which is involved is the bank could be liable for the payment to the supplier even if the importer does not pay the risk which involve is bank is liable for the payment.
02:35
The bank could be exposed to fraud if the importer or supplier is not genuine.
02:41
So the bank could be exposed to fraud and the bank could lose money.
02:56
If the goods are not delivered or not of the quality specified in the letter of the credit the bank could lose money and what are the rewards which are associated with it the bank earns a fee for issuing the letter of credit...