What is a BCL (bank comfort letter)?
BCL · Bank Comfort Letter
A letter from a buyer’s bank indicating the buyer has funds or capacity for a transaction. It is not an undertaking to pay, carries no liability for the bank, and is treated with corresponding scepticism.
Key points
- Creates no payment obligation for the bank.
- Frequently forged; only verification direct with the branch means anything.
- An LC pre-advice or SWIFT confirmation does the job properly.
At a glance
| Issued by | The buyer’s bank |
|---|---|
| Binding on the bank | No |
| What it asserts | The customer appears able to fund the transaction |
| Verification | Only direct with the branch, on a number found independently |
| Better alternative | LC pre-advice or SWIFT MT700 |
Comfort, not commitment
A bank comfort letter states, in careful language, that the bank’s customer maintains an account in good standing and appears to have the means to complete a described transaction. It is drafted to reassure without creating an obligation, and the disclaimers usually occupy more space than the statement.
No payment obligation arises from it. If the buyer does not pay, the letter gives the seller nothing to claim against. That is by design — a bank that wished to commit would issue a letter of credit or a guarantee, both of which are priced and provisioned accordingly.
Why banks are reluctant
Compliance departments dislike them precisely because they are ambiguous. A letter that reassures a seller into shipping, from a bank that owes that seller nothing, is an obvious source of complaint. Many institutions will not issue them at all, and those that do use language so hedged that little remains.
They are also among the most forged documents in the trade. A PDF on a bank’s letterhead is easy to produce and, unless verified directly with the issuing branch through a number the seller looks up independently, easy to accept. A letter that arrives via the buyer or an intermediary, rather than from the bank, has not been verified.
What to ask for instead
If the point is to establish that the buyer can pay, the instrument that establishes it is the payment instrument itself: a letter of credit issued or, at minimum, a draft LC application the issuing bank has confirmed it will process. That is a real commitment, priced by the bank, and verifiable through banking channels.
Where a full credit is premature, a pre-advice from the issuing bank, or SWIFT confirmation that a credit has been opened, achieves what a comfort letter gestures at. Both come through channels the seller’s own bank can check, which is the property a PDF lacks.
Frequently asked questions
- Does a bank comfort letter guarantee payment?
- No. It is expressly not a guarantee and creates no obligation on the bank. A guarantee or a letter of credit does that, and a bank issuing one prices and provisions for it.
- How do I verify a BCL?
- Contact the issuing branch directly, using contact details you find yourself rather than any printed on the letter, and ask them to confirm it. A letter that cannot be confirmed that way should be treated as unverified.
- Why do sellers ask for one if it is worth so little?
- As a soft screen early in a negotiation. Obtaining even a hedged letter requires a real banking relationship, so the request filters out buyers with no bank at all — but it should never be relied on as security.
Related terms
A message, usually by SWIFT, in which a buyer’s bank indicates it is ready, willing and able to proceed with a specified instrument. Its value depends entirely on the SWIFT message type used.
A bank undertaking to pay the seller once compliant documents are presented. It substitutes the bank’s credit for the buyer’s, which is why it remains the default instrument between counterparties trading together for the first time.
A buyer’s purchase order, issued on company letterhead and described as irrevocable. Despite the name it binds nobody until a seller accepts it, and in physical commodity trading it functions as a more formal-looking letter of intent.
Know Your Customer and Know Your Business: verification of identity, ownership and sanctions status of a counterparty before contracting. A cargo can be frozen mid-voyage over a party that should never have entered the chain.
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