Purpose
Understand the cash, liability and accounting controls required after a presentation decision.
Standards context
Rules and transaction hierarchy
- Settlement method follows the credit’s availability and payment terms
- Reimbursement arrangements are separate operational instructions and must align with the credit
- Sanctions, payment controls and applicable law remain mandatory
Responsibilities
Parties and roles
Paying, nominated or confirming bank
Acts according to the credit, its undertaking and any agreement to honour or negotiate.
Issuing bank
Funds or reimburses as required and records the applicant obligation and exposure movement.
Reimbursing bank
May process an authorized reimbursement claim under the relevant arrangement.
Applicant
Funds or reimburses the issuing bank according to its agreement and approved facility.
Operational sequence
Workflow and control points
Confirm payment basis
Verify complying status or approved exception, payment method, value date, currency, amount and beneficiary details.
Prepare reimbursement
Use the authenticated authorization and correct interbank or internal funding route.
Post accounting and exposure
Move contingent exposure, customer receivable or funded asset and cash according to the transaction structure.
Reconcile settlement
Match payment confirmation, bank statement, reimbursement and system records.
Close or maintain the instrument
Reduce the available amount or retain the remaining balance and future obligations.
Daily processing
Operations checklist
- Payment authorization
- Customer debit or financing
- Interbank reimbursement
- Contingent-to-funded exposure movement
- Cash and general-ledger reconciliation
- Residual availability maintenance
Exception handling
Common breaks and response
Payment occurs but contingent exposure remains unchanged
Controlled response: Reconcile the instrument, accounting and facility position before allowing further drawings.
Reimbursement is claimed twice or through the wrong bank
Controlled response: Stop duplicate release, trace authenticated references and follow the recovery and incident process.
Customer funding is unavailable on settlement date
Controlled response: Use only an approved financing or overdraft route; do not delay a bank undertaking informally.
Practical context
Scenario: partial sight drawing
A complying sight presentation draws only part of the credit. Operations pays through the authorized route, posts the customer obligation, reduces contingent exposure by the drawn amount and preserves the remaining availability and expiry controls.
Knowledge check
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