In the concrete case, a credit institution has issued two letters of credit:

1. a letter of credit effectively covered by deposits where the amount of deposits available shall effectively cover the disbursement of the letters of credit; and

2. a letter of credit effectively covered by committed lines where the disbursement of the letters of credit would be done by drawing down the facilities.

The question is if the individual products (letter of credit, deposit and committed credit facility) would need to be considered as separate items in the LCR calculation or if they could be seen as combined products (letter of credit collateralized by a deposit, letter of credit collateralized by a committed facility) and, if yes, how to consider such combined products for the purpose of the LCR. At inception (which is the date of issue of the L/C) the bank blocks the limit with the gross amount of the L/C.

At a later point in time (dependent on shipping period) the documents will be provided to the bank, they are verified and accepted. In rare cases the bank clarifies open issues or rejects the documents. Apart from the full rejection of documents the bank pays out the agreed L/C volume to the correspondent bank (bank of the exporter).