Bank Instrument Meaning, Types, Process & Procedure of Bank Instruments

Understanding The Meaning of Bank Instruments, The Process To Obtain a Bank Instrument, Uses of Bank Instruments, Description of Bank Instruments, Payment Structure of Bank Instruments and The Different Types of Bank Financial Instruments.

1. What is Bank Financial Instrument? 

A Bank Instrument is a cash based, security based or asset based financial document representing a legal agreement involving any kind of monetary value.
Bank Financial Instruments may also be described as a financial instrument that is issued by a bank or other financial institutions to a customer, beneficiary or investor and used for different financial solutions, purposes and obligations.
Some financial instruments may also be divided according to an asset class, which depends on whether they are debt-based or equity-based.
Foreign exchange instruments comprise a third, unique type of financial instrument.

Financial instruments can assist individuals, businesses, organizations and governments to overcome conventional banking challenges and fund their projects, businesses, trade financing, import and export transactions or other strategic objectives.

2. Types and Examples of Bank Instruments

1. Documentary Letter of Credit (DLC, SLC, LC)
2. Standby Letter of Credit (SBLC)
3. Deferred Letter of Credit (DLC)
4. Certificate of time deposits (CD)
5. Stand by letter of credit (SBLC)
6. Medium term notes (MTN’s) 
7. Long Term Notes (LTN)
8. Promissory Notes (PN)
9. Bank Guarantee (BG) 
10. Treasury Bills (T – B)
11. Bank Drafts (BD)
12. Bonds

3. Uses of Bank Instruments for potential holders or beneficiary

1. Bank instruments vary in scope and purpose with each bank instrument serving a specific purpose. Bank instruments are very important in international trades, trade finance, important and export transactions and they are widely used by businesses, contractors, importers as well as exporters.
2. Some financial instruments will act as Collateral or credit enhancement to shore up financial statement and profile.
3. Loan or funding commitment; demonstrate project, business, venture or program has sufficient merit or cash flow returns to warrant funding and investments.
4. Some bank instruments like letters of credit helps to facilitate international trade between companies that don't know each other and have different laws and regulations. 
5. Proof of funds, bank guarantees, letters of credit; to facilitate, secure or execute projects, trade and business transactions.
6. Bank instruments like letter of credit (LC), also known as a documentary credit or bankers commercial credit, or letter of undertaking (LoU), is a payment mechanism used in international trade to provide an economic guarantee from a creditworthy bank to an exporter of goods. Letters of credit are used extensively in the financing of international trade, where the reliability of contracting parties cannot be readily and easily determined. Its economic effect is to introduce a bank as an underwriter, where it assumes the counterparty risk of the buyer paying the seller for goods.  The International Chamber of Commerce oversaw the preparation of the first Uniform Customs and Practice fombbr Documentary Credits (UCP) in 1933, creating a voluntary framework for commercial banks to apply to transactions worldwide.

letters of credit (lc)

1. Another bank instrument know as bank guarantee acts similarly to a line of credit, except that a line of credit can be drawn upon at will by the bank's client. A bank guarantee is used only if the client does not pay its vendor an agreed-upon amount. U.S. credit institutions are forbidden from assuming guarantee obligations, and therefore most international transactions require a standby letter of credit. 

In general, bank instruments are denominated debt instrument (papers) issued by large banks and institutions to named parties and beneficiaries for specified terms and purposes. These instruments may be used as funding collateral or to enhance credit, “trade” or to enter into private placement programs.

Bank instrument delivery and authentications are critical and usually involved SWIFT MT 799, SWIFT MT 760, SWIFT MT110, etc., with Cussip, ISIN numbers.

At Kingrise Finance Limited, all our bank instruments are issued by top banks and other financial institutions which includes but not limited to HSBC, Deutsche Bank, Standard Chartered Bank, Barclays Bank, Credit Swiss, Union Bank of Switzerland (UBS), as well as other international/multinational Banks in Europe, United States and Asia.

4. Discounting of Bank Instruments

Some bank instruments can also be discounted. Discounting is a process of selling short or below value to achieve real time objectives. Kingrise Finance Limited is a bank instrument provider. We assist clients to procure bank instruments, monetize bank instruments and also discount bank instruments from prime banks.

5. Bank Instrument Monetization- Monetisation of BG/SLBC.

Bank Guarantee (BG) & SBLC Monetization or monetisation is the process of converting a bg/sblc into money or legal tender. BG SBLC funding is the process of using bg sblc to obtain loan or funding from a bank. BG/SBLC financing can also be described as the process of converting bg sblc into cash. Kingrise Finance Limited are monetizers of bank instruments. We also assist clients who out of their own efforts have bought or procured bank instrument and want to monetize them. Monetization of Bank instruments usually means converting the instrument into liquid cash. Some clients will simply apply the cash to a variety of projects while others may like to trade with it. We offer Monetization of Bank Instruments such as BG and SBLC @ 80% LTV which is one of the highest in the industry. 

6. Full Procedure, Process and Payment Structure For BG bank guarantee, standby letter of credit (SBLC/SLOC) & Letters of Credit.

Below is the normal procedure for the submission and issuance of a Bank Guarantee or Standby Letter of Credit from Kingrise Finance Limited (KFL)
Step 1:
Application is made to KINGRISE FINANCE LIMITED for opening of a BG/LC//SBLC including but not limited to the following:
1. BG/SBLC application form. (Provided by KINGRISE FINANCE LIMITED upon request)
2. Desired verbiage of BG/SBLC. (If none provided, KINGRISE FINANCE LIMITED will provide its normal BG/SBLC / letter of credit verbiage.
3. SWIFT code and address of beneficiary bank.
4. Know Your Customer (KYC) documents including but not limited to: Passport copy of applicant, proof of address documents such as electricity or water bill, articles of incorporation of applicant company and brief summary, executive summary and/or business plan of underlying transaction.
Step 2:
KINGRISE FINANCE LIMITED reviews all documents presented and evaluates acceptability of documents. KINGRISE FINANCE LIMITED then either approves application or denies and shall inform the applicant of such decision.
Step 3:
KINGRISE FINANCE LIMITED prepares draft of the BG/SBLC as it is comfortable to issue and forwards to client for approval. All drafts shall be in lined with rules and regulations governing the issuance of BG/SBLC.
Step 4:
The client approves the draft and:
1. Signs a contract agreeing to the terms and conditions of issuance and issuance charges as negotiated.
2. KINGRISE FINANCE LIMITED issues the invoice for the agreed upon charges.
Step 5:
Client makes payment of charges as per agreed upon payment structure.
1. Client shall provide TT/Wire copy of payment made to KINGRISE FINANCE LIMITED account.
2. KINGRISE FINANCE LIMITED shall confirm to client credit of funds upon receipt of funds to KINGRISE FINANCE LIMITED account.
Step 6:
KINGRISE FINANCE LIMITED uploads draft to SWIFT system and provides copy to applicant for final approval of message. Upon approval given by applicant KINGRISE FINANCE LIMITED then releases the SWIFT to beneficiary bank coordinates.
Step 7:
Copies of released SWIFT are then forwarded to the client via email or hard copy as requested. In case the client is represented by an advisor, then it is forwarded to the advisor only.
Step 8:
Any amendments to BG/SBLC are subject to approval of KINGRISE FINANCE LIMITED.

7. The following is the procedure for payment schedule. The following are general terms

1. Fees are paid before the issuance of each SWIFT message. In the case of RWA for a BG/SBLC fees need to be paid before hard copy/email issuance.
2. KINGRISE FINANCE LIMITED does not engage in JV payment structures and will not issue any message for zero monies paid upfront.
3. KINGRISE FINANCE LIMITED will not accept payment via ICBPO.
4. If KINGRISE FINANCE LIMITED fails to deliver the instrument as agreed upon, KINGRISE FINANCE LIMITED shall return the fees paid for that issuance.
5. Fees paid for an RWA and swift MT799 will be used as credit towards fees to be paid for the MT760.
6. In the case that KINGRISE FINANCE LIMITED successfully delivers RWA/MT799 and client does not go ahead with SWIFT MT760; fees paid for RWA and MT799 will not be returned.

SWIFT MT799 / MT760

All fees shall be agreed upon and stated in a formalized contract.

8. DESCRIPTION OF BUY/PURCHASE BANK INSTRUMENTS (BG/SBLC/SLOC)

1. Instrument:                BG (Bank Guarantee) Standby Letter of Credit (SBLC), cash-backed,
2. Total Face Value:          Eur/USD 2 Million (Min) to Eur/USD 2 Billion (Max)
3. Issuing Bank:              HSBC Hong Kong, Barclays Bank London, Deutsch Bank AG, Frankfurt  or any AA Rated Bank.
4. Term / Age:                One (1) Year and One (1) day, Fresh Cut
5. Invoice Price:              45% Net and 47% Gross of the face value of each BG/SBLC to the Seller, including 2% consultancy fees as per IMFPA.
6. Consultation Fee:       In total of 2%, which is to be split and paid to the consultants as follows:
                                       1% to ...(Seller's Mandate).., paid by the Seller/Payer-1
                                       1% to ..........................., paid by the Buyer/Payer-2 7. Delivery of instrument:          Bank-To-Bank by SWIFT MT-760, as per the Schedule of Delivery of Buy-Sell Agreement
8. Payment for instruments:                   By SWIFT MT-103 wire transfer
9. Original Hard Copy:                 By bonded courier to Buyer's designated Depository Bank within Seven (7) bank working days after receipt of BG/SBLC(s) settlement payment by SWIFT MT-103 into the Seller's account

9. Below is the terms and procedure for Lease BG bank guarantee or standby letter of credit (SBLC).
Description of Instruments:

1. Instrument:              Fully Cash Backed Bank Guarantee {BG} or StandBy Letter of Credit {SBLC}
2. Total Face Value:       USD 2Million (Min) to USD 2 Billion (Max)
3. Issuing Bank:             HSBC Hong Kong, Barclays Bank London or any prime Bank.
4. Age:                        One Year and  One Day (with rolls and extensions where applicable)
5. Leasing Price:            4%  (+ 2% brokers commission where applicable) 2% broker commission applies to clients that were introduced by brokers
6. Delivery:                   SWIFT MT-760
7. Payment:                  MT103  Wire Transfer
8. Hard Copy:                Bonded Courier within 7 banking days.

10. How To get bank Instrument (BG, CD, LC, BD, DLC, SBLC, SLOC)

How to get bank instrument

Kingrise Finance Limited is the worlds leading provider of bank instruments. We are incorporated in Hong Kong since 22-September 1999 as a Government Licensed Money Lender with Incorporation No.: 0689078. We are worlds leading provider of Recourse Loan, Non Recourse Loan, Project Financing and Bank Financial Instruments Specialists such as Standby Letter of Credit Funding, Bank Guarantee, Performance Guarantee Bond, Tender Bond Guarantee, Advance Payment Guarantee, Bank Comfort Letter, BG/CD/BD/BCL/DLC/LOC/SLOC/SBLC etc.
Our bank instruments, bg and sblc/sloc are issued from prime banks such as Barclays Bank London, Standard Chattered Bank, HSBC Hong Kong or any rated AAA bank of your choice. All our financial instruments are Cash-Backed and can be used as collateral to secure funding for projects, Discounting, Monetization and Private Placement Programs (PPP).
   Why Choose Us?

• Fast Turnaround
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• WE KEEP OUR PROMISE
• 20 Years of Experience & Trust
• No Personal Collateral Required
• Solutions for every customer & every industry.
• Loan amounts from $1 million to over $500 million
• Fast Approvals & Fast Funding- Closing in as little as 5 days

BROKERS: We welcome new brokers who are direct to their client. New brokers are welcomed and are rewarded with 2% commission on every deal they bring to us.
Kindly contact Us today for all your funding needs, including business loan, sme Loans, project financing, Lease bg, Lease sblc, Bank instruments Provider