This document is essential for transactions where a letter of credit needs to be secured by cash collateral under Swiss law. A Cash Backed Letter of Credit is commonly used in international trade and financial transactions where the issuing bank requires full cash security from the applicant. The document becomes necessary when companies need to provide letters of credit but must fully collateralize their obligations, often due to credit requirements or regulatory considerations. It is particularly relevant in Switzerland's banking environment, where strict regulatory compliance and security requirements apply. The agreement covers all aspects of the cash backing arrangement, including deposit requirements, security interests, operational procedures, and compliance with Swiss banking regulations and international LC practices under UCP 600.
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1. Parties: Identification of the applicant, issuing bank, and beneficiary
2. Background: Context of the transaction and relationship between parties
3. Definitions: Key terms used throughout the document including banking, technical and regulatory terms
4. Cash Backing Requirements: Details of the cash collateral amount, currency, and maintenance requirements
5. Letter of Credit Terms: Specific terms including amount, expiry date, and documentary requirements
6. Cash Deposit Arrangements: Mechanics of depositing and maintaining the cash backing
7. Rights and Security Interest: Bank's rights over the cash backing and security arrangements
8. Representations and Warranties: Standard and specific declarations by the applicant
9. Fees and Charges: Banking fees, charges and commission arrangements
10. Payment Mechanics: Procedures for drawings under the LC and use of cash backing
11. Term and Termination: Duration of the arrangement and termination provisions
12. Governing Law and Jurisdiction: Swiss law provisions and jurisdiction specifications
1. Additional Security: Required when additional forms of security beyond cash backing are provided
2. Foreign Currency Provisions: Needed when the cash backing is in a different currency from the LC
3. Transfer Restrictions: Required when there are specific restrictions on transferring the LC
4. Tax Provisions: Included when specific tax considerations apply to the transaction
5. Sanctions Compliance: Required for international transactions involving sensitive jurisdictions
6. Multiple Drawing Provisions: Needed when the LC allows for multiple or partial drawings
1. Form of Letter of Credit: Template or copy of the actual LC to be issued
2. Fee Schedule: Detailed breakdown of all applicable fees and charges
3. Required Documents: List and format of documents required for LC drawings
4. Cash Account Details: Specifications of the account(s) for cash backing
5. UCP 600 Incorporation: Specific UCP 600 articles incorporated into the agreement
6. Authorized Signatories: List of persons authorized to act on behalf of the applicant
Authors
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