Overview
The Trade Risk Participation refers to the negotiating bank/confirming bank under L/C, forfaiter, or the beneficiary bank under L/G, in order to reduce the risks they undertake, invite one or more banks to participate in the capital and/or credit risks of the issuing bank/acceptance bank, or counter guarantee bank/guarantee bank.
This service, with banks as participants, mainly covers ABC's participation in the capital or credit risks of other banks and ABC's invitation of other banks to participate in the capital or credit risks of ABC.
Features
1. To improve the cash flow of the bank.
2. To optimize the risk structure of the trade finance undertaken by the bank and to mitigate the risks.
Procedures
1. An agreement is signed with ABC on a case-by-case basis to specify the parties' proportion of participation, rights and obligations.
2. In terms of financing risks participation, the participant bank shall pay the sponsor bank the net risk participation amount with deduction of the financing costs on the payment date of participation. The sponsor bank shall, after receiving the payment from the obligator, pay the participation amount to the participant bank on the maturity date.
3. In terms of non-financing participation, the sponsor bank shall pay the fees to the participant bank based on the agreed rates.
Tips
1. ABC will not be liable for the defects in documents in the case of risk participation under L/C.
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