NEWSLETTER-2017

250 NEWSLETTER 2017 Bank Letters of Credit* Att. Nezihe Boran Demir Introduction In financing transactions, creditors, especially commercial banks, aim for repayment of loans through the smoothest manner possible. In order to secure the extended loan amount, creditors obtain secu- rity packages generally from borrowers, their shareholders or group companies to secure the extended loan amount. Within the security package, it is the intention of the lenders to receive securities that are time and cost efficient at the time of enforcement or foreclosure. Bank letters of credit are one of the most preferred securities, which include undertakings to pay the given amount without the need to conduct any further proceedings. This Newsletter will mainly focus on the defini- tion and the legal nature of bank letters of credit, validity requirements, and validity formalities and, finally, a general overview to the types of bank letters of credit, in practice. Definition and the Legal Nature of the Bank Letters of Credit Due to lack of any regulations under Turkish law with respect to bank letters of credit, the legal nature of such has been argued under the doctrine and in the decisions of the Court of Appeals. Although there are scholarly views that assert that the legal nature of bank letters of credit are a type of surety or sui generis transaction, the majority of the scholars, and the Court of Appeals, are of the opinion that bank letters of credit are a type of guarantee. Since there is no definition as to bank letters of credit in the leg- islation, and in practice bank letters of credit are mostly unlike each other, it is hard to form a strict definition 1 . Accordingly, a general * Article of September 2017 1 Merve Yalcinkaya, Description of the Attributes of Bank Letters of Credit, Legal