When selecting a bank to represent your project’s Special Purpose Vehicle (SPV), and support issuing security, the first choice should always be the bank the knows the client or requestor (sponsor) already. Can save weeks or in some cases months by skipping over lengthy KYC.
Otherwise, any licensed commercial bank is fine with us, based almost anywhere (not in countries with US sanctions), even if not a top tier global bank. The bigger the bank, the slower they tend to be.
To help you decide, we’d like to point out three key factors to consider:
- Processing speed varies widely: Smaller, licensed commercial banks (“real” banks, aka not blacklisted), are far faster and more agile. Local or regional is better as “showing up in person” provides a far more certain path to getting timely answers, getting things done, and saving a helluva lot of time.
- Build context before asking: Being clear right away about the request itself provides some of this context, including and especially why the SBLC wording is as shown in our template. Take a moment to lay out who is asking, for what purpose (project finance not trade finance), what collateral is proposed, etc. [ Ask AI or In3 for our template to guide preparation of formal letter of introduction. ]
- Understand and Control the variables. We used to say (and still do sometimes) that approaching any banker for their part in a guarantee/security instrument is like “tuna surprise” — you never know what you’re gonna get. This is because there’s a lot going on behind the scene, resulting in a highly unpredictable cocktail of
- Client collateral relative to the size of the deal
- Market conditions / capacity (we learned recently that In3’s own bank cannot handle a $920M SBLC … simply too large for them)
- That bank’s present ‘hunger” or openness to using this model (not about just the local branch but across their culture)
- Currency trading — we can fund in any currency, with Security in USD, Euros or Pounds (the major ones), and with the present situation and pressure in the US on USD, this is why we sometimes prefer going overseas
- National or regional banking rules and regulatory pressure (compliance is presently a huge issue; with our in-house expert we monitor this situation) such as, for example, if a given bank is already leveraged too much
- Personality and “neurodiversity” of the involved banker(s).
WHERE TO FOCUS: Skillful and credible presentation to the bank by the client (perhaps assisted by an In3 Affiliate to help shape this), and with this focus on proper presentation, you will decrease the “tuna surprise” effect with bankers that may not understand what you are asking or what collateral you are offering. Bring paperwork if you have assets or a letter from your sponsor if available.
It is very hard to predict a banker’s response to anything new … you have to present it properly and ask.
More at Communicating with Bankers for their part in a CAP Financial Guarantee