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Cash Collateralized Letter Of Credit for Malaysia

Cash Collateralized Letter Of Credit Template for Malaysia

A comprehensive agreement governed by Malaysian law that establishes the terms and conditions for a letter of credit facility secured by cash collateral. This document outlines the relationships between the bank, applicant, and beneficiary, detailing the cash collateral requirements, maintenance obligations, security interests, and operational procedures for the letter of credit. It incorporates relevant provisions from the Financial Services Act 2013 and adheres to Bank Negara Malaysia's guidelines while following international banking practices under UCP 600.

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Cash Collateralized Letter Of Credit

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What is a Cash Collateralized Letter Of Credit?

The Cash Collateralized Letter of Credit agreement is a crucial document in international trade finance, particularly relevant under Malaysian jurisdiction where it must comply with the Financial Services Act 2013 and Bank Negara Malaysia regulations. This document is used when an applicant needs to establish a letter of credit but the issuing bank requires cash security, typically due to credit risk considerations or regulatory requirements. It details the mechanism by which cash collateral is pledged, maintained, and potentially utilized, while establishing the terms under which the letter of credit can be issued and drawn upon. The agreement incorporates both local Malaysian banking practices and international standards such as UCP 600, making it suitable for both domestic and cross-border transactions. It serves to protect all parties' interests by clearly defining rights, obligations, and procedures for handling both the collateral and the letter of credit facility.

What sections should be included in a Cash Collateralized Letter Of Credit?

1. Parties: Identification of all parties to the agreement including the bank, applicant, and beneficiary

2. Background: Context of the transaction and relationship between the parties

3. Definitions: Definitions of key terms used throughout the agreement

4. Letter of Credit Terms: Core terms of the LC including amount, validity period, and purpose

5. Cash Collateral Arrangements: Details of the cash collateral including amount, maintenance requirements, and custody arrangements

6. Security Interest: Creation and perfection of security interest over the cash collateral

7. Rights and Obligations: Detailed responsibilities and rights of each party

8. Representations and Warranties: Standard and specific representations made by the applicant

9. Events of Default: Circumstances constituting default and consequences

10. Bank's Rights and Remedies: Bank's rights regarding the collateral and in event of default

11. Fees and Charges: All applicable fees, charges, and commission rates

12. Communications: Methods and requirements for notices and other communications

13. Governing Law and Jurisdiction: Malaysian law as governing law and jurisdiction provisions

14. General Provisions: Standard boilerplate clauses including amendments, assignments, and severability

What sections are optional to include in a Cash Collateralized Letter Of Credit?

1. Multiple Currency Provisions: Required when the LC and collateral may be in different currencies

2. Special Drawing Conditions: Needed when LC has specific drawing requirements or conditions

3. Additional Security: Used when additional forms of security are provided beyond cash collateral

4. Tax Provisions: Required for cross-border transactions or specific tax implications

5. Electronic Banking Provisions: Needed when electronic platforms are used for LC operations

6. Agent Provisions: Required in cases involving banking agents or correspondent banks

What schedules should be included in a Cash Collateralized Letter Of Credit?

1. Schedule 1 - Letter of Credit Application Form: Standard form for LC application

2. Schedule 2 - Cash Collateral Account Details: Specifications of the account(s) holding the cash collateral

3. Schedule 3 - Fee Schedule: Detailed breakdown of all applicable fees and charges

4. Schedule 4 - Authorized Signatories: List of authorized persons who can act on behalf of the applicant

5. Schedule 5 - Form of Drawing Notice: Standard format for drawing under the LC

6. Appendix A - Required Documents: List of documents required for LC drawing

7. Appendix B - Standard Bank Forms: Collection of relevant standard banking forms

8. Appendix C - Compliance Requirements: Details of regulatory compliance requirements

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

Malaysia

Publisher

Genie AI

Document Type

Letter of Credit

Cost

Free to use
Relevant legal definitions


































Clauses



































Relevant Industries

Banking and Financial Services

International Trade

Manufacturing

Import/Export

Commodities Trading

Retail

Construction

Energy

Agriculture

Shipping and Logistics

Wholesale Distribution

Relevant Teams

Treasury

Trade Finance

Legal

Compliance

Risk Management

Finance

International Operations

Supply Chain

Credit Administration

Operations

Documentary Credits

Relevant Roles

Trade Finance Manager

Chief Financial Officer

Treasury Manager

Finance Director

Import/Export Manager

Trade Operations Officer

Credit Risk Manager

Compliance Officer

Documentary Credits Specialist

Banking Relationship Manager

Financial Controller

Supply Chain Manager

International Business Development Manager

Industries








Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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