The Applicant Waives. The Bank Still Decides.

A bank examines the credit it issues with care — relationship, exposure, structure. What can receive less attention is the decision that follows when documents arrive discrepant.

When a presentation does not comply, the issuing bank may, in its sole judgement, approach the applicant for a waiver of the discrepancies (UCP 600, article 16(b)). But an applicant's waiver does not oblige the bank to honour: the decision to pay against documents its own examiners called discrepant remains the bank's own. Two decisions hide inside one word — the applicant's waiver, and the bank's separate choice to act on it.

That second decision is a fresh credit judgment. The bank pays and then looks to the applicant for reimbursement; if the applicant's financial position has weakened between issuance and the discrepant presentation, the effective, unreimbursed exposure the bank carries can be worse than the risk it underwrote at issuance. It is often taken under time pressure. In some institutions the original credit passes through a defined approval process, while the waiver decision is handled more lightly — noted, initialled, filed — and reaches no comparable review.

The original credit had governance. Its most consequential moment deserves the same — and too often gets less.