Glossary term
Confirmed
Of a letter of credit: carrying a second bank’s independent undertaking to pay, in addition to the issuing bank’s.
A confirmed letter of credit carries a separate payment undertaking from a second bank, usually in the seller’s country, alongside the issuing bank’s.
Its purpose is to remove the risks the seller cannot assess: the issuing bank’s solvency and the political and transfer risk of its country. The seller deals with a bank it knows, and the confirming bank carries the exposure - which is what it charges for.