From a bank's viewpoint, issuing a letter of credit is analogous to making a loan as far as risk is concerned.

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When a bank issues a letter of credit, they are essentially guaranteeing payment to the beneficiary of the letter of credit. This carries a certain level of risk for the bank, similar to making a loan. If the applicant (the person or company requesting the letter of credit) is unable to pay or fulfill the terms of the credit, the bank may be liable for the payment. Therefore, the risk involved with issuing a letter of credit is similar to that of making a loan.

From a Bank's Viewpoint, Issuing a Letter of Credit Is