Glossary

Letter of Credit

A bank's promise to pay the seller once the right documents are shown.

A letter of credit is a commitment from the buyer's bank to pay the seller as soon as the agreed documents proving shipment are presented and found in order. It takes counterparty risk out of deals between parties who may never have met. Banks check the paperwork to the letter, so a single discrepancy can stall payment — our trade finance desk structures and checks the documents to keep that from happening.