Banks' Performance in Letters of Credit Under Study by Industry Trade

The U.S. Council on International Banking and KPMG Peat Marwick have launched an industrywide study of letters of credit.

Dan Taylor, president of the New York-based trade association, said the study will measure bank performance in commercial and standby letters of credit using such guidelines as management structure and support, production volume, and technology.

The study - to be sponsored by as many as 50 banks - will be the first comprehensive assessment of the $200 billion industry ever, Mr. Taylor said. Past assessments were limited in scope and backed by individual banks or small groups of banks.

"We saw an opportunity to do this really on a more widespread basis than just four or five banks getting together," Mr. Taylor said. "There are a lot of smaller banks who don't want to fork over a huge amount of money to sponsor one of these things."

Letters of credit are bank-issued instruments guaranteeing payments on behalf of customers for certain transactions. In trade finance, they are bought by importers or exporters to assure goods are delivered under terms to which trading partners agreed.

Mr. Taylor anticipated the survey to discover what "drives the best to be the best."

Mr. Taylor said questionnaires should be in bankers' hands by mid-March. The international banking council hopes to complete the study by the end of June.

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