Types of Letters of Credit

By criteria of security:

Covered Letter of Credit - is a Letter of Credit secured with 100% money coverage for the whole validity period of Letter of Credit, with condition of possible use of this money for payments under Letter of Credit;

Uncovered Letter of Credit – is a Letter of Credit secured with security, other than money. As well as in case if customer provides money coverage as security, but amount of deposited funds is less than amount of letter of credit, letter of credit shall be deemed uncovered.

Depending on method of execution, executed by*:

By payment upon submission of documents – issuing bank (or confirming bank) shall conduct payment under Letter of Credit in favor of Beneficiary upon submission by Beneficiary of documents established in Letter of Credit;

By delay of payment – issuing bank (or confirming bank) shall conduct payment under Letter of Credit in favor of Beneficiary within time frames established in Letter of Credit; 

By mixed payment – issuing bank (or confirming bank) shall conduct payment of part of amount of documents upon submission of documents, remaining part shall be paid by delay of payment.

*The Bank can organize confirmation by foreign financial institution, post-financing / discounting at the expense of foreign financial institutions for above mentioned types of letters of credit.

Other types of letters of credit:

Transferable (negotiable) Letter of Credit – is a Letter of Credit under which first beneficiary shall be entitled to refer to other (transferring) bank with request to transfer Letter of Credit in full or in part to another person or persons (second beneficiary) in accordance with the manner determined by the Uniform Customs and Practice for Documentary Credits (UCP 600, 2007 Edition); 

Reserve Letter of Credit («stand-by» Letter of Credit) – is a Letter of Credit issued by issuing bank in favor of Beneficiary as a guarantee of execution of obligations of Applicant (Customer upon instruction of which letter of credit is issued) to Beneficiary. Documents submitted under reserve Letter of Credit shall certify breach by Applicant of contractual obligations. Reserve Letter of Credit is identical to bank guarantee by its functionality.