Letter of Credit Confirmation
A Letter of Credit (LC) is only as strong as the issuing bank and jurisdiction behind it. Sellers exporting to higher-risk markets often demand an extra layer of security: LC confirmation. This guide explains what confirmation means, the types available, why it matters, and how pricing works.
Snapshot:
A second bank—usually in the exporter’s country—adds its payment guarantee to the LC. If the issuing bank fails, the confirming bank pays.
Why Request LC Confirmation?
- Counterparty risk coverage:
Protects the seller if the issuing bank defaults.
- Political risk mitigation:
Covers events like FX restrictions, sanctions, or capital controls.
- Improved financing:
A confirmed LC is often discountable, allowing faster cash access.
- Stronger bargaining power:
Sellers can offer more competitive terms knowing payment is secured.
Types of LC Confirmation
Full Confirmation
The confirming bank adds its undertaking to pay once documents comply. Risk fully shifts to the confirming bank.
Silent Confirmation
An arrangement where the exporter’s bank confirms without notifying the issuing bank. Useful if the buyer’s bank won’t allow formal confirmation.
Conditional / Partial Confirmation
Confirmation applies only to certain conditions (e.g., political risk only, or a specific amount of the LC).
Back-to-Back Confirmation
Used in trade intermediaries, where one LC is confirmed and used to issue a second LC downstream.
How Banks Price Confirmation
| Driver |
Impact on cost |
| Issuing bank credit rating |
Lower ratings = higher confirmation fees. |
| Country risk |
Emerging markets often trigger political risk premiums. |
| Tenor |
Longer usance periods increase the fee. |
| Currency |
Exotic or restricted currencies cost more. |
When to Use LC Confirmation
Exporters should request confirmation if they are dealing with unfamiliar counterparties, weaker banks, higher-risk jurisdictions, or long-tenor transactions. Buyers may agree to confirmation as a way to secure better commercial terms or convince sellers to ship on time.
Request a Quote for LC Confirmation
Share your LC details—issuing bank, amount, tenor, and corridor—and we will provide confirmation pricing options from our bank network.
Request a Quote
LC confirmation is subject to bank underwriting, compliance, and counterparty approvals. Fees vary by bank, corridor, and transaction risk. Financely Group arranges confirmation services on a best-efforts basis only.