A Fronting Fee Letter of Credit is essential in international trade finance transactions where a bank charges fees for issuing or managing Letters of Credit. This document is typically used when a bank acts as a fronting bank in Malaysia, providing Letter of Credit services to facilitate international trade transactions. The letter specifies the fronting fee percentage or amount, payment schedules, and related terms and conditions. It must comply with Malaysian banking regulations, particularly the Financial Services Act 2013 and Bank Negara Malaysia directives, while also adhering to international banking standards such as the UCP 600. The document is crucial for establishing clear fee arrangements between the bank and its clients, ensuring transparency and proper documentation of the commercial terms of the LC facility.
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1. Letter Header: Bank's letterhead, date, reference number, and addressee details
2. Reference to Main LC: Clear identification of the main Letter of Credit this fronting fee arrangement relates to
3. Fee Structure: Detailed breakdown of the fronting fee, calculation method, and percentage/basis points
4. Payment Terms: Timing and method of fee payments, including currency and payment instructions
5. Duration: Period of validity of the fronting fee arrangement, typically linked to the main LC validity
6. Bank Account Details: Specific account information for fee payments
7. Governing Law Statement: Confirmation that the letter is governed by Malaysian law
8. Authorization: Bank's authorized signatories section
1. Default Provisions: Include when requested by the bank's risk department, covering consequences of non-payment of fees
2. Amendment Procedures: Include if the fronting fee might need adjustment during the LC period
3. Tax Provisions: Include when cross-border payments are involved or specific tax implications need to be addressed
4. Confidentiality Clause: Include when dealing with sensitive commercial arrangements or at client's request
5. Force Majeure: Include when required by bank policy or in jurisdictions with economic volatility
6. Relationship to Other Facilities: Include when the LC is part of a larger banking facility arrangement
1. Fee Calculation Schedule: Detailed breakdown of fee calculation methodology and examples
2. Payment Schedule: If fees are to be paid in installments, timeline of payment dates and amounts
3. Copy of Main LC: Attached as reference document
4. Bank's Standard Terms and Conditions: Standard terms applicable to LC services
5. Authorized Signatories List: List of persons authorized to handle LC-related communications
Relevant legal definitions
Clauses
Relevant Industries
Banking and Financial Services
International Trade
Manufacturing
Import/Export
Commodities Trading
Retail
Construction
Energy
Agriculture
Mining
Telecommunications
Automotive
Relevant Teams
Legal
Finance
Treasury
International Trade Operations
Risk Management
Compliance
Trade Finance Operations
Banking Operations
Credit Administration
Documentary Credits
Relevant Roles
Trade Finance Manager
Chief Financial Officer
Treasury Manager
International Business Manager
Finance Director
Banking Relationship Manager
Trade Operations Manager
Credit Risk Manager
Compliance Officer
Import/Export Manager
Documentary Credits Specialist
Financial Controller
Banking Operations Manager
Legal Counsel
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