International letters of credit

Securing obligations of counterparties under foreign trade contracts, improving security of international payments.

Letter of credit types

A letter of credit is an agreement which is separate from the sales contract or other document having the effect of an agreement on which it is based.

There are the following basic types of documentary letters of credit 

  • A covered letter of credit – one secured by the payer's own funds
  • An uncovered letter of credit – one not secured by funds of the payer as per the moment of opening
  • A confirmed letter of credit implies adding payment obligation by a bank other than the issuing bank, where documents are provided meeting the letter of credit conditions.

Letter of credit transactions

PrivatBank performs the following operations involving international documentary letters of credit:

  • Opening an import letter of credit – as instructed by the importing customer PrivatBank issues an international documentary letter of credit for the benefit of a foreign supplier company under the customer's foreign trade contract
  • Advising a letter of credit – official notification by the bank as to opening, amending or cancelling a letter of credit opened by a foreign bank for the benefit of the exporting customer
  • Executing a letter of credit – verification of documents under the letter of credit provided by the beneficiary (supplier of goods or services) followed by payment pricessing, provided the documents comply with the letter of credit conditions. In the event a letter of credit is not confirmed, payment is pricessed by the issuing bank on demand from the nominated bank.

In which cases is a letter of credit used?

In terms of foreign economic activity, companies are faced with a high level of risks having the following peculiarities

  • Difficulty of correct risk assessment due to territorial remoteness of the counterparty; difficulties associated with obtaining information about the counterparty and analysis of political and macroeconomic situation in its country
  • Complexity of resolving economic disputes between the parties arising from the high cost of organising the arbitration process, different juridical personalities of parties to the contract, complexity of applying rulings of one State within the territory of another
  • A great degree of foreign markets mobility caused by intense competition and fluctuations of market conditions
  • A higher level of losses in case of a counterparty failure to fulfil obligations under penalties imposed by the State regulatory authorities for violation of currency laws
  • Letters of credit are applied exactly with the purpose of reducing the risks caused by the above factors.


Most often, a letter of credit is used for payment settlements in the following cases:

  • Business partners have established a new, untried business relationship
  • The seller is not confident about the buyer's solvency, while the buyer is not confident as to the seller's capability to deliver goods/perform work/provide services
  • The contract subject implies large-scale projects or tailor-made products.

Benefits of using an international letter of credit

  • A letter of credit provides reliable insurance against many risks faced by a company engaged in foreign economic activity
  • You gain a very flexible settlement instrument that can be used for settlements in a variety of transactions
  • The rules of using letters of credit have been defined by an authoritative international organisation and are recognized all around the world. It is convenient both for customers and banks, as each party to a transaction has clear understanding of its rights, obligations and standard requirements imposed on all parties to a transaction
  • A letter of credit is useful as a short-term financing instrument.

What are the benefits of opening an international letter of credit in PrivatBank?

If you decide to open an international letter of credit with PrivatBank, our specialists will provide you with expert assistance regarding the following:

  • Drafting contracts which provide for documentary forms of payment
  • Developing individual settlement schemes using letters of credit
  • Developing non-standard schemes of documentary operations, such as transferable or standby letters of credit.

  • For consultancy on international documentary instruments put your question to the Head Office experts by emailing to

All collections are to be forwarded to below address:

We assume no responsibility for documents sent to any other address unless it is agreed with us by SWIFT.

Fees on operations with international letters of credit

  • Letters of credit issued by the Bank
  • Letters of credit advised by the Bank
Letter of credit's issue or increase of its amount
For amounts exceeding USD 1 mln - USD 2,000;
minimum fee - USD 50
Payment under letter of credit
For amounts exceeding USD 1 mln - USD 1,000;
minimum fee - USD 50
Obligation fee under an uncovered transaction
Learn more

min 3% per annum — covered by the pledge of rights on deposit;

min 4% per annum — covered by the pledge of property or real estate;

min 5% per annum covered by other kind of pledge or uncovered.
(min USD 20 per month)

Sending documents
Calculated as per fees of the courier service


Frequently asked questions

  • What is a standby letter of credit?
  • What kind of checking is implied under the 'Checking of documents' fee?
  • What is advising?
  • What is 'obligation fee'?