Kim: Reinhard, from your biography one can see that you
started in banking in 1963. To me this is totally surrealistic because of
the fact that this was before I was even born. This of course also is a
perfect opportunity to draw a picture of how the LC has evolved during the
last 40 years.
First of all it is obvious to focus on technology. Even though everyone is
asking when we can expect the electronic LC, it is a fact that today
basically everything is done on computers. How were LCs produced when you
started?
Reinhard:
I am tempted to say that the computer was not invented. But no
computer was used in relation to LCs. Most of us had not even an electric
typewriter and photocopying as we use it today did not exist either. All
credits and other letters were typed with carbon copies. Correction of
mistyping was a problem by itself.
Kim:
When did the computer enter the LC department?
Reinhard:
When I many years later (it could be about 1975) made a proposal to
start using electronic assistance my old boss told me several times that
“D/C and computer could not be combined”, and that I should know it. LCs
were to complicated for that.
But a few years later we nevertheless started – with
one computer for registration – and under the same boss.
Only few years later everyone in the department had its own computer and had
to share a sole typewriter.
Kim:
Today every large bank offers some kind of customer LC-bridge to their
customers. When did you first see this?
Reinhard:
When we in the 1980ies had finished our own programs for registration,
issuing, and advising Credits we as the first Danish bank could offer a PC
solution, which in the first period was based on discs to be sent to us by
mail
Kim
:Assuming
there was no internet at that time, how did it work?
Reinhard:
When our system with discs worked, we changed the system again.
The software was downloaded on the computer of our
customers, and after having typed in the instruction they were transmitted
by phone connection.
Kim
: Talking about the LC departments.
How do you think they have changed since you started till you retired from
Nordea; e.g. on structure, organisation, knowledge?
Reinhard:
It was quite different from today. When I started it was like an
assembly line. Everyone performed a part of the credit. Some issued the
credit, other checked documents and other again made the settlements to the
Danish customers. Export credits and Import credits were handled in separate
groups.
The most sophisticated part was the document checking. Because of the
assembly line system the total level of knowledge was high, but the
individual knowledge was much more limited then today. And their was a much
more hierarchic.
Later we changed the organisation to what we more or less still had when I
retired: The aim is that everybody can handle everything, including
collections. But of course some are more skilled then others.
Kim
: What about the LC specialists
relationship to the customers. Have that changed; and if yes how?
Reinhard:
We had in the beginning of my employment little contact with
customers in the daily transaction. Contacts were mainly made by phone.
Seminars etc were not hold that often, and only by the top of the department.
Together with the change in the organisation our customers were related to
individual person in the department. The had also the responsibility to
inform customers of new products, changed in rutines etc.
Kim
: A rather intangible topic – but
not less interesting, is how the LC instrument is perceived? One example; it
seems to me that the “original LC” was “only” an instrument to guarantee
that the seller was paid. Today it is also used to finance the parties in
the transaction.
Reinhard:
Financing of credits was used to some extent. But in my early days
the deferred payment credit did not exist, and I cannot remember that we had
the big problem with court cases and fraud, but I know it also existed. It
is m y impression that banks in a higher level then today accepted their
obligation on the Rules.
Kim
: There has been a lot of talk
about the so-called “non-bank LC”, and one can get the impression that the
LC buyers and LC banks for that matter, today are much more innovative in
ways of using the LC than in the “old days”. Is that impression – in your
view – correct?
Reinhard:
As I remember we had no discussion regarding the so-called “non-bank
LC”, but I remember that I used the UCP rules even for non LC purpose in
order to examine documents under financing contracts.
Kim
: What are – in your mind – the 3
major changes that has occurred in the LC world in the last 40 years?
Reinhard:
1. The use of computers
2. Court cases, often based on local law
3. Using standbys instead of guarantees (in Europe)
Kim
: Do you think the Gordian knot of
how to reduce discrepancies in LC documents presented will ever be broken –
and what is the key to break it?
Reinhard:
No. As
long as beneficiaries do not read their credits carefully and applicants in
a higher level try to abuse the credit by requiring discounts for
discrepancies with out real influence, it will not / cannot be changed.
Kim
: There is a revision of the UCP
going on. You are much involved, both as a member of the Consulting group,
but of course also as a member of the ICC Banking Commission and of the
Danish National Committee. What do you expect from that revision?
Reinhard:
Well, the same as I expected
with every revision earlier.
- Amend imprecise articles
- Adapt the rules to changed practices (i.e. On the
transport area)
- Modernise the wording
- Include some of the paragraphs from ISBP, where
it seems beneficial
Kim
: In focus today is offerings like
bolero, @GlobalTrade and TradeCard, all claiming to solve some of the
basic obstacles of the LC. What do you think when you look at their
offerings/systems?
Reinhard:
I do not know what to say, but I
have problems in really believe it will change much or help any customer.
About 10-15 years ago - when electronic documents was a new topic – one of
my former colleagues asked me ”what will you do in a few years time, when
electronic documents have take over the LC?”
He was not in the bank anymore, when I retired. I
believe the LC to survive for many years yet
Kim
: Having seen what you have seen
the last 40 years, what do you think that the LC will look like in 10, 20,
30 and 40 years time?
Reinhard:
I do not think the LC will
change in principle. There will always be a need, - as long as bankers
protect the instrument.
I also believe that many of the LCs easily could be changed to an electric
payment system, which could give both the buyer and the seller the same
benefits as a Credit. I think we must convince the applicant to try to do
business more electronically.
Kim
: You have now retired from
Nordea. Looking at the LC world as you see it today, what will you miss the
least?
Reinhard:
It’s difficult to say. I feel
that I at the moment have a good time of retirement, and still having
contact with ICC.
Kim:
Highly appreciated. Thanks!
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