What security does a bank involved in a letter of credit transaction have in return for the sum advanced?

It has possession of the documents giving title to the goods (i. e. “order” bills of lading), and thus has constructive possession of the goods.Β 

Should the buyer not be able to pay or take delivery of the goods for some reason, the bank will be in a position to sell the goods. If the goods are damaged, the bank can claim on the insurance certificate, which it will have.


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