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The Commercial Letter of Credit Final NA TALAGA

The Commercial Letter of Credit Final NA TALAGA

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Published by: Raciram Asidao Salameña on Jul 30, 2012
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07/30/2012

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I.
 
OBJECTIVES
This research aims to educate the readers about commercial letters of credit. Theresearchers want the readers to fully understand the nature of letters of credit in a bankinginstitution, its function and its importance to a business. The researchers expect that afterreading this study, they would be able to define the terms related to letters of credit on theirown.
II.
 
INTRODUCTION
The term Letter of Credit seems to be uncommon to every individual who doe
sn’t
engage in business or legal aspects of an international transaction. Some might conclude thatletter of credit is a document which proves that a person bind himself to pay for a certainamount to his creditor. Others may think that it is merely a document stipulating the terms of acredit agreement. To lessen the confusion or vague understanding of credit, we aim to presentthe different factors involving credit.Trading internationally can involve risks. Exporters run the risk of buyers failing to payfor goods, while importers may risk paying but never receiving anything. Because of thedistances involved, it may be difficult to resolve any disputes. One way of reducing the risks isto use a letter of credit. It is a document issued by one bank to another to serve as a guaranteefor payments made to a specified person. This can offer assurance to the seller that they will bepaid, and the buyer can be sure that no payment will be made until they receive the goods.This Term paper explains what letters of credit are its types, how they work, and whenyou might consider using one. It also looks at some of the drawbacks of using a letter of credit
 
and explores some possible alternatives and international rules that govern most letters of credit.There are several different types of letters of credit available to use, depending on thecircumstances.At the end of this term paper, readers are expected tolearn the functions of a foreign department in a bank, classification of letter of credit, parties toletter of credit, issuance process, flow of payments and methods of payments in letter of credit,documentation, benefits to the banker, advantages of letter of credit, and lastly the riskassociated in letter of credit.
III.
 
BACKGROUND OF THE INSTITUTION
UnionBank is a partnership among the Aboitiz Group, Insular Life and Social SecuritySystem. It started operations in 1981 and became a commercial bank by January 19, 1982. InJuly 1992, UnionBank was granted the license to operate as a universal bank. The bankacquired the International Corporate Bank (Interbank) in 1994.Among Philippine banks, UnionBank stands out for its strategy, execution andperformance. While many banks went for size and market share via large balance sheets,UnionBank has followed a highly focused differentiation strategy that emphasizes innovationand service. It has put technology at the heart of its business. Information and network accessare a core UnionBank offer. Today multiple channels are available for transaction andinformation access: 190 branches nationwide, 224 ATMs (as of January 2012), a call center andInternet bank,www.unionbankph.com. UnionBank is among the industry's best in key performance measures: absolute profit,
 
cost-to-income ratio, return on equity, return on assets, revenue/expense ratios, marketcapitalization, and earnings per share. In 2002 & 2003, the bank was recognized as amongAsia's best companies by Euro money and Finance Asia. UnionBank is also the country's onlybank to make it to the list of the world's 25 soundest banks for four consecutive years by TheBanker of London.In strategic business, the bank is a recognized leader and premier provider of corporatecash management & B2B solutions to leading local and multinational companies. Its otherstrengths are in Treasury services & capital markets, Internet banking, consumer finance anddistribution networkThe Corporate Vision of the UnionBank is to become one of the three Universal Banks inthe Philippines in the first decade of the 21
st
century, With a full range of financial products andservices for which we shall be the acknowledged leader in service, innovation and value-for-money, Conveniently accessed anytime, anywhere by delighted customers, for whom we shallbe a dominant financial services portal, All enabled by bold, smart and self-driven professionals.
On the other hand the UnionBank’s mission is to provide product solution
s, information andnetwork access that customers need to become financially and operationally efficient.

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