Confirmed letter of credit
Definition
a confirmed letter of credit is a payment mechanism used in international trade transactions. It involves a bank, known as the confirming bank, adding its guarantee to a letter of credit issued by the buyer's bank (the issuing bank). By confirming the letter of credit, the confirming bank undertakes the responsibility of ensuring payment to the seller (beneficiary) upon compliance with the terms and conditions of the letter of credit. This provides an additional level of security for the seller, reducing payment risks in cross-border transactions.
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