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The Bank to Bank LC agreement is essential for financial institutions engaging in international trade finance operations in Pakistan. It establishes the legal and operational framework for banks to issue, advise, and process Letters of Credit, ensuring compliance with both Pakistani banking regulations and international banking standards. This document becomes necessary when banks establish correspondent relationships for LC business, particularly in international trade transactions. The agreement addresses key aspects such as document examination standards, payment obligations, fee structures, and risk allocation between banks. It incorporates requirements from the State Bank of Pakistan, local foreign exchange regulations, and international banking practices like UCP 600, while also considering Islamic banking principles where applicable.

1. Parties: Identification of the issuing bank and the advising/confirming bank, including their complete legal names, registration details, and authorized representatives

2. Background: Context of the agreement, relationship between the banks, and general purpose of the LC arrangement

3. Definitions: Definitions of key terms used in the agreement, including banking terms, LC-specific terminology, and references to UCP 600 definitions

4. Scope of Agreement: Overview of the LC services to be provided and the general framework of cooperation between the banks

5. Rights and Obligations: Detailed responsibilities of each bank in the LC process, including issuance, advising, confirmation, and payment obligations

6. LC Processing Procedures: Step-by-step procedures for LC issuance, amendment, examination of documents, and payment

7. Fees and Charges: Structure and payment terms for banking fees, commissions, and other charges

8. Communications: Acceptable methods of communication, SWIFT procedures, and authentication requirements

9. Document Examination: Standards and procedures for examining LC documents, including compliance requirements

10. Representations and Warranties: Standard banking representations and regulatory compliance warranties

11. Confidentiality: Protection of confidential information and banking secrecy obligations

12. Term and Termination: Duration of the agreement and circumstances for termination

13. Governing Law and Jurisdiction: Application of Pakistani law and jurisdiction for dispute resolution