Synthetic Letter Of Credit for Switzerland

Synthetic Letter Of Credit Template for Switzerland

A Synthetic Letter of Credit under Swiss law is a sophisticated financial instrument that combines traditional letter of credit features with synthetic/derivative elements. This document, governed by Swiss federal law and regulatory framework, establishes the terms and conditions for a contingent payment obligation structured as a synthetic facility. It incorporates specific provisions required by Swiss banking regulations, FINMA guidelines, and international banking practices while detailing the synthetic settlement mechanisms, risk allocation, and documentary requirements.

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What is a Synthetic Letter Of Credit?

The Synthetic Letter of Credit serves as a critical financial instrument in sophisticated international trade and banking transactions under Swiss law. This document is particularly useful when parties require the security of a traditional letter of credit but need to incorporate synthetic elements for specific financial or risk management purposes. The document details the rights and obligations of all parties, synthetic settlement procedures, documentary requirements, and risk allocation mechanisms. Governed by Swiss federal law and overseen by FINMA, it combines elements of traditional trade finance with modern financial engineering, making it suitable for complex international transactions where traditional letters of credit may not fully meet the parties' needs. The synthetic structure allows for greater flexibility in terms of settlement and risk transfer while maintaining the security and formality of documentary credits.

What sections should be included in a Synthetic Letter Of Credit?

1. Letter Head and Reference: Bank's letterhead, date, reference number, and type of credit

2. Beneficiary Details: Full name and address of the party in whose favor the synthetic LC is issued

3. Applicant Details: Full name and address of the party requesting the synthetic LC

4. Credit Amount and Currency: Specification of the maximum amount and currency of the synthetic LC

5. Synthetic Structure: Detailed description of the synthetic nature of the LC and its underlying mechanisms

6. Availability and Expiry: Terms of when and how the credit is available, and expiration date

7. Payment Terms: Specific conditions and mechanisms for payment, including synthetic settlement procedures

8. Required Documents: List of documents required for triggering the synthetic LC

9. Special Conditions: Specific terms and conditions unique to this synthetic LC

10. Bank Charges: Details of all applicable fees, commissions, and charges

11. Governing Law: Specification of Swiss law as governing law and relevant jurisdictional provisions

What sections are optional to include in a Synthetic Letter Of Credit?

1. Revolving Credit Provisions: Include when the synthetic LC is structured as a revolving facility

2. Transferability Clause: Include when the synthetic LC is transferable to other beneficiaries

3. Back-to-Back Arrangements: Include when the synthetic LC is part of a back-to-back structure

4. Confirmation Terms: Include when a confirming bank is involved in the synthetic LC

5. Default Interest: Include when specific default interest provisions are required

6. Margin Call Provisions: Include when collateral or margin requirements apply

7. Force Majeure Clause: Include when specific force majeure provisions are needed beyond standard terms

What schedules should be included in a Synthetic Letter Of Credit?

1. Schedule 1 - Pricing Schedule: Detailed breakdown of all fees, charges, and pricing mechanisms

2. Schedule 2 - Document Checklist: Comprehensive list of required documents and their specifications

3. Schedule 3 - Settlement Procedures: Detailed procedures for synthetic settlement and payment

4. Schedule 4 - Form of Demand: Standard format for making demands under the synthetic LC

5. Appendix A - Definitions: Detailed definitions of technical terms used in the synthetic LC

6. Appendix B - Standard Forms: Collection of standard forms for various notices and requests

7. Appendix C - Risk Disclosures: Required risk disclosures for synthetic financial instruments

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

Switzerland

Publisher

Genie AI

Document Type

Letter of Credit

Cost

Free to use
Relevant legal definitions
Clauses
Relevant Industries

Banking and Financial Services

International Trade

Commodities Trading

Manufacturing

Import/Export

Shipping and Logistics

Energy

Construction

Agriculture

Mining

Relevant Teams

Trade Finance

Legal

Compliance

Risk Management

Treasury

Banking Operations

Structured Finance

Credit Administration

Financial Control

Documentary Credits

Relevant Roles

Trade Finance Manager

Structured Finance Director

Chief Financial Officer

Treasury Manager

Risk Management Officer

Compliance Officer

Legal Counsel

Documentary Credits Specialist

Banking Operations Manager

Financial Controller

Credit Risk Officer

Trade Finance Operations Manager

Structured Products Manager

Senior Banking Relationship Manager

Industries
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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