Letter of credit and Public money: Difference between pages

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imported>Doug Williamson
(Summarise 2011 data from CEPR report: http://voxeu.org/article/trade-finance-around-world)
 
imported>Doug Williamson
(Create page. Sources: Linked pages.)
 
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(LC or sometimes LOC).  
1. ''Economics - money supply - central banks.''


A promise document issued by a bank or another issuer to a third party to make a payment on behalf of a customer in accordance with specified conditions.  
The part of the money supply that is central bank liabilities.


Letters of credit are frequently used in international trade to make funds available in a foreign location.
It includes physical money (banknotes and coins), demand deposits at the central bank and any domestic central bank digital currency.




2.  ''Funding - public sector.''


==== Letter of credit contrasted with documentary collection ====
Funding for projects or activities sourced from the public sector.
Letters of credit are often contrasted, from the perspective of a seller, with an alternative structure of [[documentary collection]]s.


A letter of credit is a ''direct'' obligation of a bank to pay (against specified documents).
Contrasted with ''private money.''
 
A documentary collection means a bank ''collecting'' payment from the buyer (by presenting documents to the buyer).
 
 
A letter of credit therefore gives superior protection to the seller against credit risk or delayed cash flow, or both.
 
For this reason letters of credit are more expensive to arrange.
 
 
Compared with documentary collections (DCs), letters of credit (LCs) are used for larger transactions, and a larger total value of transactions.
 
=====Average transaction sizes (US exports)=====
LCs: US$ 0.5 - 1 million
 
DCs: US$ 0.1 - 0.2 million
 
=====Proportion of world trade in goods=====
LCs: 10 - 15%
 
DCs: 1 - 2%




== See also ==
== See also ==
* [[Advising bank]]
* [[Broad money]]
* [[Bank payment obligation]]
* [[Central bank]]
* [[Clean letter of credit]]
* [[Central bank digital currency]] (CBDC)
* [[Commercial risk]]
* [[Coin]]
* [[Condition]]
* [[Digital public money]]
* [[Confirmed letter of credit]]
* [[Funding]]
* [[Confirming bank]]
* [[M0]]
* [[Credit]]
* [[M1]]
* [[Documentary collection]]
* [[Money]]
* [[Documentary credit]]
* [[Money supply]]
* [[Irrevocable letter of credit]]
* [[Private money]]
* [[Issuing bank]]
* [[Public ]]
* [[LOC backed]]
* [[Public private partnership]]
* [[Standby letter of credit]]
* [[Public sector]]
* [[Trade finance]]
* [[Uniform Customs and Practice for Documentary Credits]]
 
 
===Other links===
[http://voxeu.org/article/trade-finance-around-world Trade finance around the world, Centre for Economic and Policy Research, 2016]
 
[http://www.treasurers.org/node/5279 Letters of credit and supply chain finance, Will Spinney, ACT 2009]


[[Category:Manage_risks]]
[[Category:Accounting,_tax_and_regulation]]
[[Category:Risk_frameworks]]
[[Category:The_business_context]]
[[Category:Corporate_finance]]
[[Category:Investment]]
[[Category:Long_term_funding]]
[[Category:Trade_finance]]
[[Category:Trade_finance]]

Revision as of 08:55, 19 September 2022

1. Economics - money supply - central banks.

The part of the money supply that is central bank liabilities.

It includes physical money (banknotes and coins), demand deposits at the central bank and any domestic central bank digital currency.


2. Funding - public sector.

Funding for projects or activities sourced from the public sector.

Contrasted with private money.


See also