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American Bankers Association Exam CRCM Topic 4 Question 90 Discussion

Actual exam question for American Bankers Association's CRCM exam
Question #: 90
Topic #: 4
[All CRCM Questions]

Issuing Bank, a foreign bank, maintains an account with First National Bank, a U.S. bank. Issuing Bank issues a letter of credit in favor of ABC, InC. , a U.S. corporation. The letter of credit contains a boycott provision. The letter of credit provides that any negotiating bank may obtain reimbursement from Issuing Bank's account at First National Bank by certifying that the conditions of the letter of credit have been met. Issuing Bank does not send First National Bank a copy of the letter of credit. May First National Bank reimburse negotiating banks for the letter of credit when it contains a boycott provision?

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Suggested Answer: D

by Salina at Jun 19, 2024, 03:00 AM

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Vivan
2 months ago
Wait, so First National Bank can just reimburse the negotiating banks without even seeing the letter of credit? That sounds like a recipe for disaster. Option C is the way to go.
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Martina
16 days ago
Yes, I agree. First National Bank should take the necessary steps to ensure they are not inadvertently supporting a boycott by reimbursing negotiating banks.
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Stephane
18 days ago
I believe First National Bank should not reimburse negotiating banks if they are aware of a boycott provision in the letter of credit.
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Clay
26 days ago
But what if First National Bank never receives a copy of the letter of credit? Should they still reimburse the negotiating banks?
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Darrin
1 months ago
I think Option C is the best choice. First National Bank should request a copy of the letter of credit before reimbursing any negotiating banks.
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Rikki
2 months ago
Haha, this question is a real brain-teaser. First National Bank should just tell Issuing Bank, 'Sorry, but your letter of credit is not welcome here. We don't do boycotts!'
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Quentin
25 days ago
Haha, that's a good point! First National Bank should definitely be more cautious with these kinds of provisions.
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Lezlie
26 days ago
B) No. First National Bank is under a duty to determine the underlying conditions of any letter of credit it pays.
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Margart
1 months ago
A) Yes. First National Bank did not know of it, so it may reimburse a negotiating bank.
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James
3 months ago
I agree with Brice. It's not enough for First National Bank to just act on the certifications from the negotiating banks. They need to review the letter of credit itself.
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Nettie
1 months ago
C) No. First National Bank should request a copy of the letter of credit at the time of its payment and then refuse to pay once it is aware of the provision.
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Tesha
1 months ago
C) No. First National Bank should request a copy of the letter of credit at the time of its payment and then refuse to pay once it is aware of the provision.
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Gerald
1 months ago
I think B) No. First National Bank is under a duty to determine the underlying conditions of any letter of credit it pays.
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Natalya
1 months ago
I agree. First National Bank should take the responsibility to review the letter of credit before reimbursing.
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Eveline
1 months ago
B) No. First National Bank is under a duty to determine the underlying conditions of any letter of credit it pays.
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Eleni
2 months ago
A) Yes. First National Bank did not know of it, so it may reimburse a negotiating bank.
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Glen
2 months ago
A) Yes. First National Bank did not know of it, so it may reimburse a negotiating bank.
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Maynard
3 months ago
But what if the bank didn't know about the boycott provision? Should they still reimburse the negotiating bank?
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Brice
3 months ago
Option B is the correct answer. First National Bank has a duty to determine the underlying conditions of the letter of credit before reimbursing the negotiating banks.
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Paulina
2 months ago
C) No. First National Bank should request a copy of the letter of credit at the time of its payment and then refuse to pay once it is aware of the provision.
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Lyndia
2 months ago
B) No. First National Bank is under a duty to determine the underlying conditions of any letter of credit it pays.
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Rhea
2 months ago
A) Yes. First National Bank did not know of it, so it may reimburse a negotiating bank.
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Xochitl
2 months ago
B) No. First National Bank is under a duty to determine the underlying conditions of any letter of credit it pays.
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Louvenia
3 months ago
A) Yes. First National Bank did not know of it, so it may reimburse a negotiating bank.
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Ahmed
3 months ago
I agree with Johna. It's important for the bank to know the conditions of the letter of credit.
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Johna
3 months ago
I think First National Bank should request a copy of the letter of credit before reimbursing.
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