Documentary operations

PRAVEX BANK offers all types of documentary transactions that will reduce the risks associated with trust between counterparties, optimize the costs of international and domestic settlements. PRAVEX BANK is part of INTESA SANPAOLO Group

With PRAVEX BANK you:

• will choose the optimal form of settlements after receiving the detailed advice on international settlements issues and internal market settlements issues;
• will reduce the risk of non-payment or non-delivery of goods due to the  letter of credit financial instrument;
• will reduce costs for foreign trade transactions and domestic trade transactions due to such financial instruments as documentary letter of credit, guarantee/ standby letter of credit, documentary collection;
• will enter international markets provided that documentary transactions are confirmed by INTESA SANPAOLO Group;
• will increase the volume of your trade transactions without attracting additional funds by using such financial instruments as guarantee /stand-by letter of credit;
•  will structure trade transactions using documentary instruments which will give you an advantage in cost compared with the cost of credit funds.

Documentary letters of credit:

• export letters of credit;
• import letters of credit.

Letter of credit is an irrevocable obligation which is assumed by the bank (issuing bank) under the order of Order Provider (payer under letter of credit) to pay to the Beneficiary (funds recipient under letter of credit) the agreed amount upon presentation of documents complying with the conditions of the letter of credit.

The best way to minimize the risks in international trade for companies performing export – import transactions is to use documentary letters of credit.

Benefits and advantages of letter of credit payment method:

• opportunity to replace advance payment with payment after delivery – Beneficiary receives from “PRAVEX BANK” JSC the payment guarantee instrument in the form of letter of credit – payment is guaranteed, production can be started;
• using letter of credit payment method will provide the client with advantage in price compared with cost of credit resources;
• letter of credit is one of the sources of replenishment of working capital and allows increasing the volumes of your trading operations without attracting funds resources: there  is no need to withdraw funds from the turnover before making payment under letter of credit;
• payment under the letter of credit is performed by the bank only upon the fulfilment of all conditions under the letter of credit; including the submission of shipping documents in strict accordance with the requirements of the letter of credit, which eliminates the risk of non-delivery and significantly reduces the risk of delivery of defective goods;
• the letter of credit, until the moment of making payment by the Bank, is not subject to currency control - delivery of the goods is possible within a period exceeding 120 days after the letter of credit is opened.

The Bank offers you the following services:

• preparation of the draft agreement with the counterparty regarding the conditions of payment by using the Letter of Credit;
• preparation of confirmation of the import Letter of Credit by the Bank of INTESA SANPAOLO Group;
• verification of documents and execution of a Letter of Credit;
• organization of post-import financing using the Letter of Credit as a form of payments;
• advising the Letter of Credit, opened in your favor, and providing the necessary consultations;
• adding confirmation to the Letter of Credit, opened in your favor – it’s a possibility to get additional guarantees of receipt of payment under the Letter of Credit, opened in your favor – in addition to the payment obligations of the bank who had issued the Letter of Credit;
• discounting of confirmed Letter of Credit, opened in your favor – it’s a possibility to get financing of payment under Letter of Credit with deferral payment condition. Discounting of confirmed Letter of Credit shall be provided after you’ve shipped the goods (rendered services) and submitted credit conform documents to JSC ‘PRAVEX BANK’ under the Letter of Credit with deferral payment condition. Submitted documents shall be paid by JSC ‘PRAVEX BANK’ before due date of payment under the Letter of Credit. Thus, you, as an exporter, have the opportunity to obtain financing for the completed export, while such financing is provided by the Bank to the exporter within the limit, established on a foreign bank, and does not require the establishment of a credit limit on the exporter.

Legal Basis: Uniform Customs and Practice for Documentary Letters of Credit No. 600 - (Paris: International Chamber of Commerce, 2007), applicable provisions of legislation.

Banking guarantee (standby letter of credit as a form of guarantee) — is the tool for ensuring the fulfilment of contractual obligations of counterparties, according to which the Bank-Guarantor assumes a monetary obligation to the Beneficiary to pay on behalf of the Principle, in the event of partial or full nonfulfillment of its obligations.

Bank guarantee is one of non-resource financing instruments which, by its very nature, does not require the withdrawal of funds from circulation and allows the Principal to avoid advance payments for goods / services. And thus, it guarantees the saving of own resources and / or their use for another purpose.

At the request of the client PRAVEX BANK provides:

• bid bonds — for tendering companies — ensuring the fulfilment of tender obligations by tender participant;
• advanced payment guarantee — for establishing relations with new business partners — ensuring the return of advance payment to the buyer in case the seller fails to fulfil its obligations under the agreement;
• payment guarantee — guarantee for making payment under the agreement;
• retention money bond — guarantee for repayment of the amount of loan and/or interest to the lender, can be used as collateral for the bank loan.

Legal basis:

• Uniform rules for guarantees on request No. 758 (Paris: International Chamber of Commerce, 2010);
• international practice on ISP98 standby letter of credit;
• provisions of current legislation.

Documentary collection is the intermediary banking activity on transfer of financial and/or commercial documents in order to make the payment to the exporter for the goods through the bank. 

Advantages of documentary collection:

• Low cost of the services;
• Simplicity of the instrument.
• As payment is not guaranteed to the supplier when performing obligations under documentary collection during shipping or providing services, it is advisable to use documentary collection only when:
• the seller (exporter) and the buyer (importer) trust each other;
• the creditworthiness of the buyer is beyond doubt;
• the political, economic and legal situation in the importer’s country is stable;
• international payment transactions of the importing country are not restricted.

Legal basis:

• Uniform Rules for Documentary Collection No. 522 (Paris: International Chamber of Commerce, 1995);
• provisions of the current legislation.