Bank Confirmation Letter (BCL)

What is a Bank Confirmation Letter (BCL)?

Definition

A bank confirmation letter is a letter that confirms an established loan or line of credit with a financial institution. It is a letter gotten from a Buyer’s bank to confirm his credibility to match up an expected payment level to a third party. The bank confirmation letter is also known as a bank capability letter or comfort letter by some institutions.

Understanding the bank confirmation letter

The overall purpose of a bank confirmation letter is to serve as proof to a third party that a customer of an institution has sufficient resources required to execute a business deal. It only states that the buyer has access to sufficient funds to cover all costs on an order made, however, it does not serve as a guarantee of payment. A BCL is always issued in relation to a specified project the borrower initially indicated. Peradventure, if the bank customer of borrower changes their mind on the project they want to use the BCL for, a new BCL would have to be requested. Some countries require that the bank credit confirmation letter clearly indicates the line of credit is made available to the borrower.

Sample of a BCL:

Bank Name: Bank Address: Bank Confirmation Letter (BCL) Dated:

Dear Sirs,

This is a confirmation of our mutual client (name of company) who currently maintains a bank account with us. On request from them (client), we, (name of bank) with all authority and mandate declare that the said client (name of company) is financially capable to initiate the process of goods worth 000.000 metric tons (quantity of goods). We, hereby, confirm the client’s (name of company) financial eligibility.

We understand payment is to be made to (third party) by (name of company) …

NB: The above is only a sample of what a BCL is expected to look like there are several other formats that can be used.