Letter of Credit Confirmation Insurance, The Implementation in Turkey and Possible Effects

Abstract

In this study, it is aimed to examine “letter of credit confirmation insurance product” which brings a matter to a solution for Turkish banks’ difficulties to confirm letter of credits. As it is known, Letter of credit is one of the most frequent product used by financial institutions. Letter of credits are being used especially in international trade transactions. Banks operating in Turkey, often face difficulties such as having insufficient limits for the correspondent banks, having narrow correspondence network etc. Banks operating in Turkey, would be able to confirm letter of credits by means of letter of credit confirmation insurance; maybe they wouldn’t be able to confirm these letter of credits if there is no insurance for their confirmed letter of credits. As a result of this study, it has been assessed that providing letter of credit confirmation insurance to the market which doesn’t have such product yet would increase the volume of Turkey’s exportation significantly and it could make possible to actualize an important potential export.