A Marginal Deposit On Letter of Credit agreement is a fundamental document in trade finance, widely used in Malaysian banking practice to secure Letter of Credit facilities. This document becomes necessary when a customer requires a Letter of Credit for international trade transactions and the bank requires security in the form of a cash deposit. The agreement details the terms of the marginal deposit, typically ranging from 10% to 100% of the Letter of Credit value, and outlines the rights and obligations of both the bank and the customer. It complies with Malaysian banking regulations, including the Financial Services Act 2013 and relevant Bank Negara Malaysia directives, and can be structured under either conventional or Islamic banking principles. The document is essential for businesses engaged in international trade, providing a secure framework for trade financing while protecting the interests of all parties involved.
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1. Parties: Identification of the bank and the customer (applicant) entering into the marginal deposit agreement
2. Background: Context of the agreement, including reference to the underlying Letter of Credit application
3. Definitions: Key terms used in the agreement including 'Marginal Deposit', 'Letter of Credit', 'Deposit Amount', and other relevant banking terms
4. Deposit Requirements: Details of the marginal deposit amount, calculation method, and maintenance requirements
5. Purpose of Deposit: Specification that the deposit serves as security for the Letter of Credit facility
6. Bank's Rights and Authority: Bank's rights over the deposit, including right of set-off and lien
7. Interest or Profit Rate: Terms regarding any interest or profit (for Islamic banking) applicable to the deposit
8. Duration and Release: Terms governing the duration of the deposit and conditions for its release
9. Customer's Representations and Warranties: Customer's declarations regarding their capacity and authority to enter into the agreement
10. Events of Default: Circumstances constituting default and consequences thereof
11. Governing Law and Jurisdiction: Specification of Malaysian law as governing law and jurisdiction for disputes
1. Islamic Banking Provisions: Additional provisions when the facility is offered under Islamic banking principles
2. Foreign Currency Provisions: Additional terms for deposits in foreign currencies
3. Multiple Letters of Credit: Terms for when the deposit secures multiple Letters of Credit
4. Tax Provisions: Specific tax-related terms if applicable to the deposit or interest/profit earned
5. Joint Account Provisions: Additional terms for when the customer consists of multiple parties
6. Force Majeure: Provisions for unforeseen circumstances affecting the agreement
1. Schedule 1 - Deposit Details: Detailed breakdown of the marginal deposit amount, calculation method, and percentage requirements
2. Schedule 2 - Letter of Credit Details: Specific details of the Letter(s) of Credit being secured by the marginal deposit
3. Schedule 3 - Fee Schedule: Breakdown of all applicable fees, charges, and commission rates
4. Appendix A - Standard Terms and Conditions: Bank's standard terms and conditions for marginal deposits
5. Appendix B - Compliance Requirements: List of regulatory compliance requirements and documentation needed
6. Appendix C - Operating Procedures: Procedures for deposit maintenance, top-up requirements, and release mechanisms
Relevant legal definitions
Clauses
Relevant Industries
Banking and Financial Services
International Trade
Manufacturing
Import/Export
Retail
Wholesale
Commodities Trading
Construction
Agriculture
Mining and Resources
Relevant Teams
Legal
Finance
Treasury
Trade Operations
Risk Management
Compliance
International Banking
Credit Administration
Corporate Banking
Islamic Banking
Relevant Roles
Trade Finance Manager
Chief Financial Officer
Finance Director
Treasury Manager
Import/Export Manager
Banking Relationship Manager
Credit Risk Officer
Compliance Officer
Legal Counsel
Trade Operations Manager
Financial Controller
Account Relationship Manager
Documentary Credits Specialist
Banking Operations Manager
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