International Banking Flashcards
7 cards from real NAB practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 International Banking flashcards as text
In international trade finance, what is the primary function of a Letter of Credit (LC)?
Answer: To guarantee the exporter payment provided documents comply with LC terms
A Letter of Credit is a bank commitment to pay the exporter upon presentation of compliant documents, reducing payment risk for both buyer and seller in cross-border trade.
What distinguishes a documentary collection from a letter of credit in trade finance?
Answer: Under a documentary collection, the bank facilitates document exchange but does not guarantee payment
In a documentary collection, the bank acts as an intermediary transmitting shipping documents but does not guarantee payment — the exporter bears more risk than with an LC.
What does the Incoterm 'CIF' require the seller to arrange?
Answer: Cost, insurance, and freight to the destination port
CIF (Cost, Insurance, and Freight) requires the seller to pay for the cost of goods, marine insurance, and freight charges to the named destination port.
What is forfaiting in international trade finance?
Answer: The without-recourse purchase by a bank of medium-term receivables from an exporter
Forfaiting is the without-recourse purchase by a financial institution of medium- to long-term export receivables, giving the exporter immediate cash and transferring all credit risk to the forfaiter.
Which ICC publication governs the rules for Letters of Credit used in international trade?
Answer: UCP 600
UCP 600 (Uniform Customs and Practice for Documentary Credits, 2007 revision) is the ICC publication that governs the rules and practices for documentary letters of credit worldwide.
What is a 'Bill of Lading' (B/L) in international trade?
Answer: A document of title issued by a carrier acknowledging receipt of goods for shipment
A Bill of Lading is issued by the carrier and serves three functions: a receipt for goods, evidence of the contract of carriage, and a document of title that can be used to transfer ownership.
Under an irrevocable Letter of Credit, when can the issuing bank cancel or modify it?
Answer: Only with the consent of all parties, including the beneficiary
An irrevocable LC cannot be amended or cancelled without the agreement of the issuing bank, the confirming bank (if any), and the beneficiary (exporter), providing strong payment security.