Letters of Credit (L/C) Services at Vietcombank

1. Introduction

1.1. Overview about Vietcombank

Vietcombank, or the Joint Stock Commercial Bank for Foreign Trade of Vietnam, is one of Vietnam’s
largest and most reputable banks, especially prominent in supporting the country’s trade activities.
Established in 1963, it was originally focused on serving foreign trade operations, and it continues to play
a vital role in facilitating international trade through its wide range of financial services. Vietcombank
provides trade finance, foreign exchange, and credit services, helping Vietnamese businesses engage
more securely and efficiently in global markets. With a strong reputation for stability, innovation, and
compliance with international standards, Vietcombank is recognized globally and has partnerships with
numerous financial institutions worldwide, strengthening Vietnam’s position in the international finance
community.

1.2. Letter of Credit Issuance:

Vietcombank issues Letters of Credit (for both imports and domestic transactions) upon the request of
the purchasing entity to guarantee immediate payment or payment at a specified future date of the
Letter of Credit's value to the beneficiary upon the beneficiary's presentation of a set of documents that
comply with the terms and conditions stated in the Letter of Credit.

Letters of Credit can be issued with or without a collateral margin based on a certain percentage of the
total committed value by Vietcombank, with the margin or waiver depending on the creditworthiness of
the enterprise.

Benefits:

• Ensures security for both the seller and the buyer;

• Helps the buyer reduce capital pressure;

• Receives advice on the content and best practices for transactions to ensure benefits;

• Can be financed through waivers of the Letter of Credit margin ratio or loans.

2. Types of Letters of Credit Offered by Vietcombank.

2.1. The range of L/C types that Vietcombank offers to support different needs in international trade.

- Irrevocable Letters of Credit (Irrevocable L/Cs):

An Irrevocable L/C cannot be canceled or amended without the agreement of all parties involved (buyer,
seller, and issuing bank). This type of L/C provides a high level of assurance to the beneficiary (usually
the exporter), as it ensures the issuing bank’s commitment to honor the payment once the terms and
conditions are fulfilled. Vietcombank’s irrevocable L/Cs are widely used in international trade because
they provide certainty and security, reducing the risk for exporters that might otherwise hesitate to ship
goods without guaranteed payment. This L/C type is particularly beneficial for high-value transactions or
trading with new partners.
 - Confirmed Letters of Credit (Confirmed L/Cs):

In a Confirmed L/C, an additional bank—often the exporter’s bank—confirms the L/C in addition to the
issuing bank (usually the buyer’s bank). This means that both Vietcombank and the confirming bank
guarantee payment to the beneficiary if the L/C terms are met. This arrangement is especially important
in high-risk situations where the exporter may have concerns about the issuing bank’s creditworthiness
or the political and economic stability of the buyer’s country. By adding a confirmation from a reputable
bank like Vietcombank, the seller gains extra assurance that payment will be received, regardless of any
issues with the issuing bank. This makes Confirmed L/Cs particularly valuable for exporters in volatile
regions or where there’s a perceived risk of non-payment.

- Standby Letters of Credit (Standby L/Cs):

Standby L/Cs serve as a backup payment mechanism rather than a primary form of payment. They act
more like a guarantee, where Vietcombank agrees to pay the beneficiary if the buyer fails to fulfill their
payment obligations under the contract. Standby L/Cs are often used in situations where a buyer needs
to prove their financial reliability, such as in long-term contracts or high-value projects. They are also
commonly used in service contracts and performance guarantees, where the beneficiary needs
assurance of compensation if the buyer doesn’t perform as agreed. For Vietcombank, Standby L/Cs help
support both importers and exporters by securing deals and instilling confidence in cross-border
partnerships, often making it easier for businesses to secure large or complex contracts.

Each of these L/C types plays a specific role in international trade, with Irrevocable L/Cs providing
security against cancellation, Confirmed L/Cs adding an extra layer of payment assurance, and Standby
L/Cs offering a fallback payment option for riskier scenarios. Through these L/Cs, Vietcombank helps
businesses mitigate various risks, improve cash flow predictability, and build stronger international
relationships.